Which investment methodology is best for you?
Generally speaking, a short-term investment is one that matures or is sold within about three years or less, while a long-term investment might be held for ten years or longer. Regardless of which type is selected, responsible and successful financial investing requires significant patience. Attempts to make a quick “killing” in the market generally end in failure. Even so-called short-term investments require some time to show their value.
Short-term assets are intended to be sold within three years or less. Examples of typical short-term assets are certain stocks, short duration bonds (with maturities from a few months to five years), and mutual funds that are heavily invested in short duration bonds.
In the stock market, more cautious investing is called for because of the shorter time span available to recover from any sudden market dips. Short duration bonds may ultimately produce less income than longer term fixed income investments, but at the same time are less likely to lose value due to rising interest rates.
Long-term assets are generally held for several years. Typical long-term assets are stocks, long-term bonds (“long bonds”) and index funds.
Long-term investment strategies can be more aggressive and riskier because short-term performance highs and lows tend to even out in the long run.
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