Short Term vs Long-Term Investors

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Short-term investors are investors who invest in financial instruments that are intended to be held in an investment portfolio for less than one financial year. In many cases, such investments are only held for a few weeks, and in the case of traders, perhaps even a few hours. 

Long term investors, on the other hand, are people who invest in long-term financial instruments that they hold for more than 5-8 years. However, the definition can change depending on who you ask. 

Some financial institutions define long term as anything longer than 1 year, but the 1-5 year investment window is often viewed as a medium term investment.

Which is Better: Short or Long Term Investments?

Your financial goals determine whether short-term or long-term investments are better for you. The same asset can be a short-term or long-term investment, depending on the investor’s approach – shares held by a day trader would be classified as a short-term investment, while shares held by a pension fund would be a long-term investment.

The Differences Between Short and Long-term Investments

1) Risk Profile

Short-term investors tend to prefer higher risk/reward investments such as equities. Some stocks can be quite volatile, such as those in technology or cryptocurrency. These can offer the potential for quick profits, but of course the value of stocks can fall as well as rise. Investors are also taking interest in fractional ownership of shipsMarinecoin is the native exchange token of ShipFinex. The token will enable fractional ownership of ships that generate income, global payments, remittances & operational expenditure by shipping companies worldwide.

2) Passive vs Active

Short-term investors tend to be more active in managing their portfolio because they make changes more often to outperform the market. Long-term investors typically take a more passive approach to asset management.

3) Volatility

Short-term investors tend to be open to more volatile assets than long-term investors because short-term traders typically rely on the volatility of stocks to realise profits.

4) Investment Goals

Investors who have immediate goals will tend to opt for short-term investments. If you are a trader who relies on the investment to pay for your living expenses, then your goal will be to make an income within the next week or month. Other short-term investors looking to fund a purchase, such as a car or vacation, will generally look for short-term investments. Those seeking retirement income will choose longer-term options.

What Are My Long-term Investment Options?

Long-term investments include assets that are less liquid than stocks, such as real estate and bonds, but stocks held over several years also make excellent long-term investments. These investments offer the potential for significant growth and are resistant to fluctuations or declines in the market. 

Investors seeking diversification can opt for a multi-asset fund, where risk is spread across multiple asset classes. This protects your capital investment in the event of a decline in one or more specific sectors.

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