Considering the economic and financial fluctuations that we are facing today, one of the concerns of people is to achieve more wealth and profit, which is a long process and will be possible with patience and constant attention to investment. Although many people make short-term profits with the help of short-term investments and volatility, these profits will not necessarily last. Financial market giants such as Varun Buffett and Elon Musk believe that investing should be done with a long-term view. Many people expect to get a huge wave of profit after investing and passing a short period of time, while they have neglected the fact that it takes time to get more returns for the invested asset. In the following, we will learn more about the concept of investment, especially long-term investment.

What is investment?

Investing means not using existing financial resources in the hope of acquiring more valuable resources in the future. To put it more simply, investment means that a certain amount of capital is used in a sector that in the future, in addition to maintaining the principal, will bring significant profitability.

Please note that investing does not mean that you can get a huge profit and become rich in a short period of time; Rather, reaching the point of success in investment requires patience, knowledge and long-term vision.

In terms of time, investment can be divided into two types of short-term and long-term investments, which we will define each of them below.

What is short-term investment?

Short-term investments usually include assets that are held for less than a year. Of course, there is no globally defined time frame for short-term investments, and sometimes, depending on the type of investment, short-term investments may last up to 5 years. Usually, people consider this type of investment for a period of several months in order to get the desired return in the short term with the help of market fluctuations. Any asset, regardless of its appearance, is a short-term investment. Short-term investment assets are less stable and experience more volatility over time. For example, you can get significant profit from dollar price changes by buying dollars and having enough information about its price fluctuations in a certain period of time.

One of the most important features of short-term investment is its high liquidity; It means that it is possible for you to quickly convert your property into cash.

The most common short-term investments include buying stocks, currency, and digital currency.

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Long Term Investment

Long-term investment assets include assets that are held for more than one year; Because the main yield of these assets is realized after a certain period of time. Investors often classify non-cash assets as long-term investments. The value of these assets increases slowly but predictably. In most cases, long-term investments exist in non-cash form and usually it is not possible to sell them in a short period of time. Although this type of investment is associated with high risk, but if successful, it will give the investor a high profit.

The most common long-term investment is the purchase of real estate, the purchase and sale of which is time-consuming due to the problems that exist, and this investment is classified as a long-term investment. As we said, the most important feature of short-term investments is high liquidity, but long-term investments do not have this feature, and sometimes you have to wait a few years to sell them and get a good return.

Is short-term or long-term investment better?

The first step to start any investment is to determine the right strategy. Also, one of the most important parts of determining a strategy is determining the time horizon. Note that in order to have a successful and profitable investment, you must have patience and long-term vision. If you are interested in short-term investments and volatility, try to allocate part of your capital to long-term investments; Because these types of investments help you to be safe from the temporary fluctuations and excitement of the market. In this case, if you suffer losses from short-term investments, long-term investments will help you to be safe from fluctuations and compensate a part of the damage.

Long-term investment methods

As we mentioned, many people are interested in short-term investments and getting desired returns in the shortest time. But in reality, this is a long-term investment that will bring you significant returns. Today, there are many investment methods that you can choose according to your risk tolerance. But the best way to invest is to use different methods and have diversified investments to minimize your risk. In the following, we introduce some long-term investment methods.

Long term bank deposit

The first method that is considered in long-term investment is the long-term bank deposit. Among the services offered by banks and financial institutions are long-term bank deposits, which are lower risk and subsequently less profitable than other long-term investment methods. This method is suitable for people who have a low risk tolerance. These long-term deposits are designed in such a way that it is not possible to withdraw or deposit money in these types of deposits during the specified period of time.

debt securities

Debt bonds are instruments issued to finance public and private institutions. These bonds are usually issued and sold by the government. Since the payment of principal and interest of debt bonds is guaranteed by the government, investing in these bonds has little risk. Partnership bonds and sukuk bonds are the most important types of debt bonds.

Partnership bonds have a legal license from the central bank and are usually issued by the government or government institutions to finance construction and service projects. To buy these bonds, you must participate in its public offering and buy.

Sukuk bonds are other financial instruments that are Islamic in nature and can be traded. These bonds have a specific value and its buyer will be a partner in a part of the property or a set of properties and the profit and loss resulting from it.

take stock

Another long-term investment method is buying shares of reputable stock companies. Of course, for long-term investment in shares, you should thoroughly check the condition of the companies in terms of fundamentals and choose a company whose intrinsic value is higher than the current value. In this case, market fluctuations and excitements will not make you doubt; Because the company you have invested in is fundamentally strong and will generate significant returns for you in the long run. However, in some cases, due to unforeseen events, the company you have chosen is in a critical situation, and it is necessary to be flexible and get out of this share. This type of investment has a very high liquidity, which has attracted many investors. Investors can sell their shares and cash out their capital in any situation. Other advantages of this method include the following:

• By buying shares, the investor will become the owner of a part of the company’s assets.
• In addition to increasing the stock price in the long term, if the company’s condition is good, a dividend is also paid periodically to the investor.
• The minimum capital required to buy shares is much lower than other financial markets.

Investment funds

Investing in investment funds is one of the indirect methods of investment. In fact, these funds collect the financial resources of different people and, with the help of experts and experienced people, invest these resources in different financial markets that have the highest returns, in order to provide the highest return for its investors. In fact, these funds provide you with the possibility to benefit from a diverse portfolio of assets and the resulting profit with your small capital. Finally, each person will share in the profits and losses of the fund according to his contribution.

Real estates

Buying housing and land is one of the traditional methods of investment that has attracted many people since the past. It can be said that this method of investment has a low risk, although in some cases, the adoption of laws such as the tax on empty houses can challenge this type of investment. Another important point of this type of investment is that investing in this field requires a high initial capital. In addition, selling assets in this type of investment is a difficult and time-consuming task and reduces the liquidity of your capital.

Coins and gold

Buying coins and gold is another long-term investment method that has high liquidity. Investing in this area does not require a lot of capital and you can buy gold with any amount of capital. Please note that the price of gold depends on various factors, including the dollar rate and the world price of annas, and the price of gold fluctuates with the change of the rate of these factors. One of the challenges of this investment is keeping gold and coins. Investing in gold mutual funds, in addition to solving this problem, allows you to invest in coins and gold with minimal capital.

Digital currency

Today, digital currencies have high profitability, which has made many people attracted to this market. Although investing in this field in the long term can be associated with significant returns, it is always recommended to get enough information and knowledge before entering this market.

Why investing in the stock market is one of the best long-term investment methods?

Today, investing in the stock market is one of the best investment methods in developed countries. In Iran, the capital market is one of the markets that has brought better returns than other investment methods in the long term.

To compare the stock market with other parallel markets, the following points can be mentioned

• The stock market has been more profitable in the long term than other parallel markets such as coin, gold, housing, automobile, etc. So that during a period of 5 years leading to April 1400, this market has been associated with a return of about 1450%.
• The stock market is more liquid than some other financial markets, such as the housing market, and it allows you to liquidate your capital at any time. Of course, note that the shares of some companies are not easily sold, therefore, when entering, you should pay attention to the volume of transactions of the desired shares and buy the shares of a company that has a high volume of transactions.
• In financial markets such as the gold, automobile and foreign exchange markets, investment options for individuals are limited, while in the stock market there are more than 600 different types of securities with different levels of risk and return, which allows you to form a diverse portfolio of assets. Manage your trading data and risk.
• Currently, you can invest in the stock market with the amount of 500 thousand Tomans. While you need several million funds to buy physical gold or buy a car. Also, to invest in the housing market, the minimum capital required is several hundred million.
• In the stock market, you can buy and sell stocks easily through online trading systems. While this is not possible in other financial markets such as gold market, car market, housing market, etc.
• The companies in the stock market are required to periodically publish their financial statements on the Kodal website. On the other hand, regulatory institutions have a stronger presence in the stock market, which has made this market more transparent than other financial markets. Investors can get the necessary information about the companies they intend to invest in by reading and reviewing the reports and financial statements published by the companies and buy the shares of these companies with full knowledge.

Long-term investment benefits

Long-term investment has advantages, the most important of which are the following:

• Avoiding emotions and hasty decisions

Sometimes, due to economic pressures, you may make hasty decisions that lead to financial loss. The best way to avoid such decisions is long-term investment. In fact, one of the most important features of long-term investing is that your immediate emotions will not affect your decision. When you invest with a long-term view, immediate events and emotions will not affect your decision because you know that you will achieve your desired return in the long term with the considered strategy.

• Maintain asset value

Due to the inflationary conditions prevailing in our country, the value of cash decreases every day, while you can maintain the value of your property and achieve significant returns by long-term investment of your property in dynamic and value-creating sectors and industries.

• Prevention of systematic and unsystematic risk

The risks that threaten our assets are divided into two categories: systematic and unsystematic risks. Systematic risks are risks that are caused by political and economic events and decisions of the country and the world. On the other hand, unsystematic risks are risks that originate from the decisions and events of the companies in which we have invested. With the help of long-term investment, you can avoid systematic risks that cause inflation. Also, considering that you have a long-term vision in investing, from the fleeting events that happen to the industries and sectors in which you have invested; You ignore and protect your capital from unsystematic risk.

 The probability of achieving the desired yield is high

Experience has shown that those who invest with a long-term vision are more likely to achieve their desired returns.

• Pay less tax

Those with long-term investments will pay less tax than traders who are constantly trading.

• Benefit from compound interest

Many people who have long-term investments can reinvest the profits from their investments and benefit from compound interest.

Frequently asked questions about long-term investing

What is the best long-term investment method?

The stock market is considered the best long-term investment method due to the following features:

• Transparency and high liquidity
• Low minimum capital requirement
• Having the most return in the long run
• Diversity in securities with different levels of risk and return

Is the return on investment more in the stock market or its parallel markets?

Historical data show that despite the high volatility of the stock market, long-term investment in this market has been more profitable than other parallel markets such as gold, housing, automobile, etc.

What is the minimum amount required to invest in the stock market?

Unlike markets such as the housing, gold and car markets, which require millions and billions of capital, the minimum capital required in the stock market is 500 thousand tomans.

Conclusion

In this article, we tried to point out short-term and long-term investment and their differences. We also introduced long-term investment methods so that you can choose the right investment method based on various factors such as the level of risk tolerance, the amount of capital, and the desired financial goals, with full knowledge, and obtain the return you want.