Investments are broadly classified into short-term and long-term investments that require objectivity and commitment to achieve goals even in volatile markets. Your timeline matters. To reach your financial goals you should know when to use long-term and short-term investments. As a thumb rule, experts suggest debt investments for your short term goals that are to be achieved within 3 years and equity for long term goals that are to be achieved beyond 5 years.
When you invest your funds for less than 3 years, it is the short term investment. It can be fixed deposits, mutual funds, bonds, money market funds etc. Short-term investments are used to meet short term financial goals and fulfill the need for stable returns.
Long-term investments are generally assets like stocks, fixed deposits, real estate meant to meet major expenses, so funds are invested for 10 years or more to grab opportunities for growth in the investment portfolio. Most investors invest to purchase a home, kid’s education, children’s marriage or for their retirement. As the investment period is long, there is a greater probability of maximising returns at a high rate of return.
Short-Term vs Long-Term Investments
Several factors distinguish both types of investment and should be kept in mind while deciding to invest.
When to Choose Long-Term
Sometimes it makes sense to opt for long-term investments and you need to give them enough time to grow into a corpus to meet your financial goals. Let’s see what are these motives:
Before you stop working, you have to accumulate a retirement corpus. If you’re more than two decades away from your retirement, still you can start investing in stocks as they are a decent asset to build wealth. Choose fundamentally strong companies and try to invest in sectors where technology is champion. When you are closer to retirement, you can allocate your funds to different assets like Fixed Deposits to earn regular payouts.
Protection From Inflation
When you want to protect your investment from inflation, beat inflation with long-term investments, like stocks. Stocks are known for the potential of higher rates of return in the long run. Bonds are also known to maintain the same rate of progress in spite of inflation.
When to choose short-term Investment
Short-term investments include assets like FDs, bonds, some mutual funds. You should consider short-term and shorter-term investments in the following scenario:
When you need the money Soon
When you save for the short-term to make a down payment, use short-term investments. You can invest in deposit accounts that permit you to withdraw money whenever you require it. Generally, these assets are less risky. You should consider money market mutual funds to make investments. Volatile options like stocks are not suggested here as you may lose money when you need your fund.
What is Intraday Trading
Intraday trading is considered as a shorter-term investment where you need to be aware of price action without coming under influencers, rumors, and gossip. Look at history and stats to make potentially profitable decisions. You must have the ability to recognize market trends. To trade in the stock market, you require a trading account.
Open trading account
As you know, intraday trading revolves around the price action of securities. You need an advanced trading platform to make trading smooth. Bajaj Finance Securities Limited (BFSL) is providing an advanced online trading platform and affordable brokerage plans. For the procedure of how to open a trading account, you need to access its official website and fill the application form along with documents in digital form. Within 10 – 15 minutes, you will get your account details.
The Bottom Line
Be it saving or investing, keep some money aside always. Determine your goals and consider both types of investment while deciding on investment strategy. You should know the strengths and weaknesses of long-term and short-term investments and choose investments that better fit your financial requirements. Ideally, opt for a mix of long-term and short-term investments to balance your investment portfolio.