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Short term or long term investments ?



The word investment in itself conjures subliminal doubt and fear in our minds.

And it’s quite difficult to arrive at a common conclusion, because the relevant risks depend on a large number of factors, the most common of them, being the length of time you wish to keep your money out of your pocket and in the stock market.

TAX

Tax rates are tricky and an investor has to carefully calculate the tax rates for his investment, because sometimes it is possible that the tax you’ll pay may drastically affect your bottom line, and making potentially large capital gains not worth the investment in the first place!

The tax rates in your long term investments aren’t lumped with your income rate, and thus it becomes quite easy to figure out how much you’ll owe at the end of the investment period.

In short term, however, the investments are lumped with the rest of the money you’ll make that year, and thus making it a little costly in the long run.

CAPITAL GAIN

A capital gain is the core income that you earn out of an investment.

The capital gain from short term investments aren’t much – they won’t earn you a lot of money, because short terms are usually for investment plans that last less than a year. However, the short term plans are much less risky.

Long term investments are more risky – they involve leaving the money that you earned out in the market for atleast a year and for as long as you wish. Sometimes, people might want to re-invest the gains they get back into the long term plan, as well. Although this is risky, the added reward is that the returns that you get out of a long term plan is much, much higher, and it will surely add on to your wealth.

To summarize, let’s say that whether you chose short term or long term goals depends on the goals you have for yourself.

If you’re in for a quick win, and you want to take your money out as soon as possible or whenever you wish to – go for short term investments.

On the other hand, if you’re willing to be patient and are looking for investments that have the potential to drastically increase your net worth – you need to go for long term investments.

 

Written by: BALAKARTHIGA.M 



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