If you are looking to secure a financial future for you and your family, breaking your back on employment may not be the answer.
If you have asked the question, “What is considered a long term investment?” at some point in time, then you are on the right track.
Long-term investments take years before an investor can reap their harvest, which makes this ideal for them.
In comparison to short-term investments, the rewards from long-term investments are bigger and better.
If you want to know more about ways to help you grow your financial assets, you can start reading the book Think and Grow Rich by Napoleon Hill.
Get all the highlights and learn the key points of the book at Blinkist.
It is a platform that can get you useful information on investing from this book in just 15 minutes.
Apart from the useful information you can get from the book, below are some valuable lessons that you can use.
What Is Considered a Long Term Investment?
Before diving into the numerous options you have as an investor, let’s have a clear definition of a long-term investment.
This strategy involves buying or acquiring assets or stocks and holding onto them for a period of one to five years.
Some investors hold on to their investments for as long as a decade or more.
The goal is to keep its interest and value increases over time, thereby accumulating wealth that you can enjoy for a long time.
This investment strategy requires patience, discipline, and risk-taking since its rewards come years after.
How To Prepare for Long-Term Investments
Apart from understanding the basics of investment, you have to know what you want.
You can start by setting financial goals and their timeline.
You also have to put your mind on how much you are willing to invest and how much risk you are comfortable taking.
Keep in mind that low-risk investments have lesser returns as compared to high-risk investments.
Preparing yourself for market fluctuations is necessary, too, as you will be tested and subjected to making decisions along the way.
Different Types of Long-Term Investments
There are several kinds of long-term investments that you can choose from.
The exciting part about it is that you can diversify your investment into several types.
It secures your assets and gives you an idea of the most suitable kind of investment for you.
Let us start learning about what is considered a long term investment.
When we speak of stock, we refer to a portion of the company’s ownership.
The value of ownership will depend on the number of stocks you have.
By owning a company’s stock, you get to benefit from the company’s financial wins.
Companies have the option to share their profit with stockholders in the form of a dividend.
Companies usually release the payouts following a schedule.
In addition to this, a stockholder can have a capital gain when the business becomes a good investment for the market.
In this case, the stock prices can increase significantly, allowing the stockholder to sell and make money out of it.
Unfortunately, this can happen the other way around too. Stock prices can also plummet and may result in capital loss.
For starters, you must know about the types of stocks that investors usually go for, including:
- Growth Stocks
It is ideal for those who want to invest in companies that usually grow fast and deliver high investment returns like Facebook.
The catch for this type would be that you have to be cautious in choosing the company to invest in.
These companies will be concerned about building the business, so all the profits will be directed to it, instead of dividends.
This type is known to be among the top performers in the last few decades.
The downside of investing here would be when a recession hits or a bear market comes, and the stock value significantly drops.
It is a risky part of the market, and it will require you to maintain a high-risk tolerance for at least three to five years before seeing returns.
The risk is high because stocks can plummet in an instant.
But if you prepare your research and find the right company to invest in, the potential of your returns is limitless.
- Small-Cap Stocks
When we speak of small-cap stocks, we are talking about investing in stocks of small companies.
Investors go for this because of a company’s potential to grow rapidly and capitalize on a promising market.
Since smaller companies have limited resources and power to go head-on with more prominent companies, its risk is very high.
It can plummet anytime and cost you your investment, so ample research is needed to find a promising and well-run company to invest in.
Though these are volatile and prone to fluctuation, the rewards can be promising once done with the right company.
An excellent example of a business that started like this would be Amazon.
- Dividend Stocks
Investors who do not like taking risks and doing a lot of research stick to dividend stocks because it gives them a regular payout.
Though its growth is slower than growth stocks, it can generate a steady and stable income for its investors.
That is common in companies that have matured over the years and have a lesser need for money.
This alone makes it a safer type of investment, but it is not immune to fluctuations.
The rewards for this type can be high, but it is incomparable to the growth stocks’ returns.
ETF or Mutual Fund (Stock Funds)
This is for an investor who does not wish to do a lot of analysis and research.
It is ideal for those who want to invest aggressively but still rest in a less volatile and safer bet.
You can go for a diversified fund which leaves you with the average return of all the companies included.
Meanwhile, investing in stocks that are not too diversified can be affected by specific factors depending on the industry involved.
This is less work and more stable returns for the investor than when investing in individual stocks.
For beginners, you can check out these types of funds in the market.
- Bond Funds
When we speak of bond funds, we talk about bonds that come from different issuers.
You can have varying categories depending on the issuer, risk level, duration, and other details about the bond.
It is among the safest long-term investments in the market, but it is secured better once it becomes a part of a fund.
Bonds are not immune to fluctuation, but it promises stability.
Compared to investing in stocks, putting your money on bonds gives you a better safety blanket.
You can get as much as four to five percent yearly, depending on the type of bond you get.
Government bonds are always safer than those from corporate issuers.
- Target-Date Funds
This type of fund can be a combination of bond funds and stock funds.
It has the same risks and vulnerability to fluctuation.
The only difference is that you have to set a target date or retirement year for this type.
This takes care of the management of your portfolio by shifting it from risky to conservative as your target date nears.
To translate this better, you will have more stocks and exposure to volatility initially.
But as your target date comes, it is designed to shift to bonds for safer investments.
For this type, you are sacrificing the rewards for safety. Some advisors recommend setting a target date ten years from investment because this promises better returns in the future.
Real Estate Investments
Investing money in real estate is one of the favorites among investors across the globe.
You can do this by putting in cash to acquire an estate along with commissions.
The real deal happens a few years after holding on to the estate.
It entails maintaining the integrity and overall value of the asset until you are ready to sell it.
The good thing about it is that you can seek help from banks in terms of financing.
They can shoulder the initial investment and give you a plan to repay it in increments.
It usually comes with low-interest rates, so you can enjoy being able to see something that is yours while paying it bit by bit.
Learn More About Money and Investment on Blinkist
Investments require preparation because it is not a walk in the park.
A person should learn the ropes of investing before diving into any form of it, whether short-term or long-term.
Feed your mind with knowledge on long-term investments with the books featured in Blinkist.
This premium platform gives you access to books on money and investment.
Read a book in just 15 to 20 minutes and get to choose from over 4,500 non-fiction titles.
Learning and investing knowledge that can help your financial goals is a great step for your future.
Book Recommendation: Think and Grow Rich
This book by Napoleon Hill isn’t a typical quick-rich scheme.
It provides knowledge on the strategies several millionaires used to achieve their goals.
It also provides tips on how to approach failures, setbacks, and more.
Every person has a unique preference and behavior in terms of investing.
With the factors and guidelines discussed and the different kinds of long-term investments, you can decide.
Take in all the elements at play in the market, along with your preferences.
Then, analyze which type is worth investing money in. You can also invest in varying kinds of long-term investments to make sure your money is safe and well-invested.
An investor should also know the ins and outs of investment or how to succeed, such as Think and Grow Rich.
There are also a couple of podcasts and short online book summaries about investments available at Blinkist.
They have a lot of exciting and helpful book recommendations for aspiring and active investors.•