Definition of Investment is one of the most important aspects of a personal financial management system. By investing, you can get passive income which can then be used for various things, from equity to buy a house, pay for children’s education costs in the future, to become a retirement fund to make your old age more comfortable.
If you’re learning to invest, you’ve probably heard of long-term investing and short-term investing. Do you know the difference between the two? If so, have you decided which type of investment best suits your financial goals?
Long-term investment may be the best choice if you want to prepare some funds for future needs. In this article, we will discuss what long-term investing is and what types of long-term investments you can choose from.
If you are confused about how to choose the right investment, see the information on examples of long-term investments in this article.
Understand Long-Term Investment
Long-Term investment is the kind that can pay off in the long term. In contrast to short-term investments which can usually be paid off and the results are in a matter of months, long-term investments can usually only be enjoyed after a few years. Typically, this time period can range from 5 years and more.
You may be wondering, why should you invest so much time? This is because the purpose of long-term investment is to meet future needs.
Long-Term Investment Objectives
As stated earlier, the purpose of long-term investment is to meet financial needs that will arise in the future. What are the different long-term investment goals from short-term investment types?
Long Term Investment Goals Include:
- Earn higher passive income over a longer investment period.
- Fulfill various personal or family financial goals that require very large costs, such as buying a house, paying for children’s education, financing marriage, financing life in retirement, etc.
- Directing special funds to be stored for a long period of time so that they are not used prematurely.
- Protect the value of money from significant declines due to inflation and other changes in economic conditions.
5 Types of Long-Term Investments
The following are 5 examples of the most popular long-term investments:
Precious Metals Investments (Gold)
The first example of long-term investments is precious metal gold. You certainly know how the price of gold continues to rise every year, right?
This constant increase in the price of gold makes it one of the most popular types of long-term investment.
Gold is the right choice for those of you who are just learning about investing. You only need to monitor the gold price when it starts to fall and hold it for a long time, about 5-10 years.
Stock Investment Stock
is one type of investment in the form of proof of capital ownership of certain assets or companies. Many large companies sell their shares to the public in order to get a capital injection to expand their business.
As an investor, you will certainly benefit from buying shares. You can earn huge profits by buying shares. But it must also be understood, stocks have a very high risk because the profits are also high (high risk – high return).
Mutual Fund Investment
The next long-term investment instrument that is very suitable for those of you who are just learning to invest is mutual funds. This investment vehicle involves a third party to manage the funds you enter. Since you don’t have to manage your own mutual funds, the value of these investments tends to be stable compared to stocks.
Furthermore, your funds will be managed by the investment manager for inclusion in the stock market. So, mutual funds will make it easier for you to invest because there are already parties who help in the process of managing the funds to be invested.
Real Estate Investment
Houses, land, or other buildings are real estate assets that can serve as long-term investments. Every year, property prices continue to rise, but a significant increase has been seen in the last 10 years, so the returns on this long-term investment are quite high.
If you start buying property now, property prices in the next 10 years will definitely go up. It’s just that you need to understand that when investing in property, you also need a very large capital.
One of the easiest long-term investments for novice investors is deposits. A time deposit is an investment instrument that requires you to deposit a certain amount of funds to a bank within a predetermined period of time.
One of the most popular types of deposits to invest in is time deposits. The benefits obtained through deposits are even greater than those of ordinary savings due to higher interest rates.
In addition to higher interest rates, time deposits are also safer than regular savings. With this investment instrument, you can save a certain amount of money within an agreed period with the bank.
In the period, you cannot withdraw the money that has been put into it. If you make a withdrawal before the due date, you will be penalized.
Deposits can be a safe option for those who want to start investing. In addition to the easy process, the risk of this investment is very small and the return you get is also very profitable.
So much information that we can convey to you and hopefully useful.