There are a variety of different types of investments available
today... there are short-term investments, long-term
investments, and as many different investment strategies as
there are investors. If you find yourself a bit overwhelmed by
the prospect of investing and are unsure of whether you should
invest in short-term or long-term plans, don't let yourself get
bent out of shape.
By simply taking the time to compare the benefits and drawbacks
of both short-term and long-term investments, you can determine
which type is best for you and your current financial needs.
In addition to providing you with the drawbacks and advantages
of short- and long-term investments, below you'll find other
pertinent information that can assist you in making decisions
about your finances... both for now, and in the future.
Short-Term vs. Long-Term: a Comparison
Obviously, there are differences between short-term and
long-term investments. Short-term investments are designed to be
made only for a little while, and hopefully show a significant
yield, whereas long-term investments are designed to last for
years, showing a slow but steady increase so that there is a
significant yield at the end of the term.
Advantages of Short-Term Investments
The main advantages to short-term investments are the potential
for fast growth and the fact that the term may only last a few
weeks to a few months. Though there tends to be more fluctuation
in many forms of short-term loans, these loans allow more
control over your money and it usually isn't out of your
possession for very long.
Disadvantages of Short-Term Investments
As mentioned above, short-term investments tend to be a bit
riskier and show a much higher rate of fluctuation than their
long-term counterparts. While there is a good chance that you'll
make money with a short-term investment, there is also a chance
that you'll lose money.
This is especially the case when dealing with the stock market,
since many of the short-term investments made with stocks and
bonds involve precision timing to sell when the stocks or bonds
are at their peak just before they begin to drop.
Advantages of Long-Term Investments
Just the opposite of short-term investments, long-term
investments have the ability to gain small amounts of money over
a longer period of time. The slow-but-steady pace of long-term
investments allow for a much greater degree of stability and a
much lower risk than short-term investments.
They also are ideal for making your savings or retirement fund
grow... the investments usually continue to grow over the years,
maturing just as you need them.
Disadvantages of Long-Term Investments
Of course, the main disadvantage of long-term investments is
that they increase in value slowly and can take years to mature.
For those individuals who need a high yield in a short period of
time, long-term investments are definitely not the way to go...
between the fees that are associated with some types of
investment and the small fluctuations that any investment will
experience, many long-term investments might actually go down in
value before they begin to climb over time.
Additionally, with many of the long-term investments that you'll
find, you tend to have much less control over your money until
the investment matures... there are usually penalties or fines
for early withdrawal or selling stocks and bonds through
long-term investment programs.
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