When it comes to starting an investment, many new investors struggle between choosing a long-term investment or a short-term investment due to the lack of knowledge and experience in the field. In general, both long-term investments and short-term investments often bring a particular amount of benefits to investors. However, long-term investments are proven to be more beneficial due to several reasons provided in the article below.
What are the differences between long-term investments and short-term investments?
No matter what investment area is being chosen, the length of the investment is always one of the most important factors that many investors take into consideration to assess the level of risk and profitability.
Long-term investments are a form of investment that operates over a period of many years (usually above 3 years). This form of investment is suitable for those who want to use their savings to generate sustainable profit, as long-term investments help investors to avoid fluctuations from the short-term investment market.
On the other hand, short-term investments is a form of investment that is suitable for those who are willing to take on the risk and experience several different areas of investment. To be able to start a short-term investment, you must be knowledgeable about the current market and have enough experience to cope with any market change that might happen in the near future. The risks that come with short-term investments are also known to be higher than the risks that come with long-term investments.
Why is a long-term investment more beneficial than a short-term investment?
One of the main concerns for any type of investment is market volatility. Market volatility is used to measủe the degree to which prices change over time. One of the most outstanding advantages of long-term investments is found in the relationship between market volatility and time. Investments held for a longer period of time lend to exhibit lower market volatility than those held for a shorter period of time. The longer you invest, the more likely you will be able to weather low market periods.
Putting your money in long-term investments also provides tax advantages on capital gains. Long-term gains are usually taxed at rates below your income tax bracket. On the other hand, short-term gains are usually taxed as regular income.
Additionally, long-term investments also help investors to enhance their patience and calmness. Instead of paying too much attention to price changes, long-term investors can be able to spend their time to learn about a potential company’s long-term growth prospects or the viability of a new business model.
Start your own long-term investment in the open-ended fund managed by VinaCapital
In this booming 4.0 revolution, investment is no longer an area that is difficult to participate. This is why the number of younger investors also increase and they tend to entrust their capital into reputable fund management companies.
In particular, the open-ended fund managed by VinaCapital is one of the most outstanding solutions in the market. Better yet, it is available in the Timo app for your convenience. When investing with VinaCapital through the Timo app, you can choose between Equity Opportunity Fund (VEOF) or VinaWealth Enhanced Fixed Income Fund (VFF).
If you are thinking about starting your first investment, you can find out about some principles you need to know before starting your own investment here.
Hopefully the above article has helped you to have some more insights about long-term investments and short-term investments, as well as help you to choose a suitable solution for yourself to generate profitability from your savings.