Perhaps the only sure way to secure a good financial future is to invest in profitable assets. A well-built investment strategy and a properly selected portfolio today are the key to your prosperity tomorrow.
There is no need to oppose long-term vs short-term investments, they do not contradict, but complement each other. First of all, let’s define the terms:
Short-term investments are investments for up to three years, sometimes up to a year or less.
Long-term investments are aimed at more distant prospects, perhaps even decades.
When Is Better to Choose Long-Term Investments
As a rule, these are assets with low liquidity, minimal risks and low profitability. In the physical world, these assets traditionally include real estate, securities and collectibles. You own them, they rise in value, but you don’t have instant access to your money.
Long-term investments are better if:
- Before retirement more than 20 years.You have to work for more than two decades and all this time you will have sources of income. And your assets will add in value without your participation.
- You need a financial plan for the next seven to ten years. If your goal is to be achieved during this period, a long-term investment would be a perfectly reasonable decision. For these purposes, investment portfolios include low and medium risk assets.
- You protect yourself from inflation.To keep your savings safe from inflation, it is wise to purchase securities, stocks or bonds.
When is Better to Choose Short Term Investing
However, in addition to strategic goals in life, there are also tactical goals. In addition, money may be needed to create a stable source of income. There are several scenarios in which it makes more sense to focus on short-term investing:
- You will need money soon. If your goal is to save for a down payment on a home, education for children, etc., a short-term investment might make sense. It can be a deposit account or short-term bonds, which provide a certain rate of return and give a fairly large degree of freedom of access to your funds.
- You need an additional source of income. In such cases, financial experts recommend investing in highly rated bonds.
Is It Worth Investing in Cryptocurrency
Digital assets are historically new, and therefore practically unexplored and unpredictable phenomenon in the world of finance. They combine incompatible characteristics in a bizarre way. On the one hand, cryptocurrency is a typical high-risk asset that is traditionally recommended for short-term investment.
On the other hand, it is simply impossible to predict when and how much the price of a coin will change. Your asset can lie almost unchanged for several years, then, as soon as you convert BTC to XMR, it will sharply rise in price and just as rapidly collapse to its original positions. The uncertainty of the waiting period suggests that there may not be instant returns and cryptocurrency is better viewed as a long-term investment tool.
Considering the absolutely crazy volatility of the cryptocurrency market, experts recommend investing no more than 10% of your investment portfolio in cryptocurrency. And remember that you can invest in high-risk assets only with your own funds and in those volumes that you are not afraid of losing.
When planning your investment strategy, consider your goals, timing and priority. Ideally, an investment portfolio should include both short-term and long-term investments in different assets. No more than 10% of your portfolio can be allocated to cryptocurrencies.