Short Term Vs Long Term Investment Plans

Short Term Investing vs. Long Term Investing - TheStreet

There is no short cut to quick wealth creation in financial markets. It requires effort in terms of patience and close attention to the market and a lot more commitment. Investments are of two kinds according to their time short term investment and long-term investment. Both types of investment have their own merits and demerits, which vary according to the investor and the assets you choose to invest.  Let us study in detail about Short term and Long-term investment plans.

It is suggested to have a proper research before one start investing in market. What is suitable for one investor may not suffice for another investor as the goals and aim vary for every investor. While investing for any plan a person must analysis the financial goals and the risks. Doing so will help to understand the investment plan which suits the best.

Short term investment:

Short term investment plans are highly liquid with low market risks. They are traded for a period of 3 years. Few of the short-term investment instruments are:

Treasury bills: Treasury bills are highly liquid instruments. These funds can be redeemed in period of 91 days.

Recurring deposits: RDs are safe investment plans that offer higher returns than any saving account. Recurring deposits can be opened for a very short duration of 6 -12 months.

Post office time deposits: The tenure for these funds vary from 1 year -5 years.

Gilt funds: These funds are government securities hence considered to be zero-risk funds. They involve zero risk and provide decent returns.

Ultra short-term funds: The maturity period of these funds are between 3 -6 months and provide comparatively higher returns.

Large cap mutual funds:   the funds here are invested in companies with large capitalization. They provide stable returns over a period of one to three years. They are low-risk investment as the companies are well established.

Low duration funds: These funds are debt funds and money market funds that have a period of 6 months to 1 year.

Money market funds:  The amount invested in Money markets are money market funds and the redemption period of these funds are one year.

Bank Fixed deposits:  Fixed deposits have a tenure of 14 days to 10 years. They have high-interest rates, but the liquidity can be an issue as few banks restrict pre-mature withdrawal.

Sweep-in fixed deposits:  These deposits have a tenure of around 12 months and offer comparatively higher returns than savings account.

Long Term Investments:

These investments allow investors to invest in aggressive markets and provide higher returns and involve higher risks. The returns of these funds are received after 5 years or more.

Stocks: Investing in stocks require a lot of research and a help from an expert mainly broker. One needs to understand the markets trends and be aware when to sell the stocks. But if invested rightly these funds can yield very high returns. The companies provide IPO to raise funds for their company. After the (IPO) initial public offering, the shares of the company are traded in markets.

Equity Mutual Funds: Equity funds are also known for high returns in long term. One can invest in small funds in mid-cap and small-cap funds and earn higher returns.

As we can see no investment plan is better or worse than the other. It all depends upon the investor’s motive and financial goals.

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