Long term investment options fascinate and attract many, if not all, investors. The most attractive feature of these investment options is that they often offer some of the highest returns in the investing world.
Long term bonds, for example, generally offer higher returns than bonds that have shorter periods of maturity. Similarly, term deposit accounts with longer terms often offer higher rates of interest. Thus, long term investment options are often a preferred choice for investors. Even those investors who normally (or mostly) invest only in short-term investment options may try to allocate a part of their funds to longer-term investments in order to benefit from the higher returns available.
Long term investments may also carry certain tax incentives. Gains from short-term investments are often taxed at the highest rate (or at a comparatively high rate) whereas certain long term investments may not be taxed at all or may be taxed at lower rates. Governments often offer tax rebates on longer-term investments in order to encourage such investments. The reason for this is that such investments may lead to greater economic activity in the country, greater economic growth, etc.
If you are fascinated by long term investments, then you have come to the right place. In this article, we will quickly and simply tell you everything about what is a long term investment, how to invest long term, etc.
Common Long Term Investment Options
In general, any investment that is made for a period longer than 1 year is considered a long term investment. Thus, a wide range of investment options are categorized as long term investments. Let us now look at some of the most popular long term investment options.
Investing in the share market is one of the most common (popular) long term investment options. Many of us have heard tales of early investors in companies like Apple, Microsoft, etc. becoming millionaires once these companies established themselves. While some equity investors may have a short-term investment horizon (they may buy some stock with the intention of selling it within a year), most experts suggest that investment in the stock markets should be made with an investment horizon of at least 5 to 10 years. The reason for this is that in the short term there may be fluctuations in the market which may lead to lower returns (or even losses in some cases).
In the longer term, well-managed companies are expected to yield good returns – it is believed that short-term fluctuations would not have much long term impact on the share performance (stock market performance) of good companies. Thus, equity investment is a highly preferred option for long term investment.
While equity investments can certainly yield high returns, another attractive feature of equity is that it offers investors a lot of flexibility. Thus, investors with many different types of investment goals find that equity can play an important role in their investment portfolio. Accordingly, investors apply many different types of strategies when investing in equity. Let us quickly take a look at some of these strategies.
First of all, most investors purchase shares of a company with the expectation that the shares would gain in value over a period of time. Thus, selling off the shares at a later stage is expected to yield profits. Additionally, profitable companies often pay dividends to shareholders. These dividends can be an additional source of income (and gains). Thus, many investors looking for fixed income from their investments also purchase shares.
Many investors search for under-priced shares in mature industries (older industries). Such companies (and industries) may not see a lot of rapid growth – i.e., growth in the short term. But, over the longer term, these stocks are expected to gain in value and yield good profits. Investors who follow this strategy may often have an investment horizon of up to 10 years or even longer. Many legendary investors swear by this method of investing and attribute their success in the world of investments to this strategy.
A lot of investors look for quicker returns in the equity markets. Such investors often invest in new companies in sunshine industries – industries that are relatively new and are expected to perform well in the near future. (For example, some information technology companies can be said to b