Benefits of Staying Invested in Long Term
There are many types of investments in the market today and many investment styles. The purpose of the investment and the investment instrument usually determine the investment style. Based on the duration of the investment there are two main types of investment styles, long-term and short-term. Long-term investments are investments that are held for 10 years or more, these investments are usually for something important like, education, retirement, buying a house, etc. Short-term investments are made for more immediate wants like a vacation, a car, a gadget etc.
There are benefits to both of these styles of investing, but long-term investing has proven to be more rewarding to the investor. Listed below are some of the benefits of long-term investments.
• Unattached/Neutral Investment
Not that you lose attachment with your money but the short-term ups and downs in the market are not going to stress you out. The volatility in the market would eventually lose its effect on your investment and your plan is going pay-off really well at its maturity. Short-term investments are more attached kind of investments rising and lowering blood pressure every time the graph moves.
• Favorable Compounding
Investing, Re-investing, Re-Re-Investing….. Now that is how compounding works and that too in your favor. Long term investments are a blessing for people who look forward to bagging a heavy bag in the later stages. It allows you to re-invest your dividend and get the compounding benefits of your principal amount.
• Ease of Use
Investing in long-term mutual is more or less one-time homework and then you can sit back in your favorite recliner and relax. It does not require much algebra every now and then for portfolio equations. Long term investments keep you free from the hassles of being an active investor who needs to keep a vigilant eye on the market trends.
• Lower your Taxes
Another advantage of long-term investing is that you’ll pay far less in taxes than if you’re an active trader. Short-term traders or those who own their investments for a period of 365 or fewer days, pay tax at their top marginal tax rate.
• Investment Risk Drops
Investing over the long run reduces your investment risk by removing lost opportunities. Trying to dive in and out of the market at just the right time could result in your missing big up days in the market.
• Plan for big expenses in the future
Retirement, education, wedding, future house, or old age car, you name it and long-term investment fits them all. A disciplined approach towards saving for the ultimate one desire or need that will be heavy on your pockets is a long-term investment.
• Saves Associated Cost
Investing comes with hidden incurred costs that don’t seem to impact on the superficial level but in a broader picture are quite high a number. Short term investments require frequent transactions resulting in related commission with each one of them. This commission amount goes unaccounted for every transaction but when summed up is a huge number. Also, there is a relative tax to be paid per transaction/investment if for a shorter period. Another important aspect of short-term investments is that you pay to the exchange through which you are transacting. This basically sums up three different types of costs which are inoperative in long-term investment.
•Saves You Time
With long-term investments, you don’t need to study and analyze day-in and day-out the patterns and trends in the market which saves you valuable time. Time management is an added benefit offered by long-term investment.
• Saves You from Anxiety
Finally, as we talked above, long-term investments are neutral investments which save you from unnecessary anxiety and tensions. Any change in the market graph won’t put you head-over-heels for immediate action; those are for the short-term investors.
You already made the necessary arrangements with your long-term investments. Why worry? Relax and stay invested with Piggy!