Long-Term or Short-Term Investments - Which Should be Your priority?
Investment is a long term financial goal. Yes, a lot of people try to time the market themselves, but it involves a lot of risk. This needs expertise, especially if you are investing for a short-term horizon. Generally, making a long term Mutual Fund Investment is safer and easier to plan. But then of course, you should figure out your risk appetite and the schemes that meet your requirements best.
Before you make any investment, it is better to learn about the market and understand the risks that accompany Mutual Fund Investment. Plus, if you need money over a short-term period then you will have to act a little conservatively so that your money gets time to recover if market sees a dip.
Long term investments offer returns over several years. You should figure out what rate of return you desire, and select a mutual fund that offers that rate of return averaged over five or ten years. When you make a long-term investment, you shouldn’t sell your stocks when the market dips and you should not get worried when the stocks drop. If you see past trends, you will realise that a dipping market has always recovered over time. However, if you withdraw your funds when the prices are low, you might lose a lot of money. So, the best move is to leave your investments alone so that they get time to recover.
And when it comes to risk, it gets reduced as the term of investment increases. If you are looking to withdraw money in the next few years, then you will have to be a little conservative financially towards your investment, parking your money in the bank or some other secure investment avenue. What use you are going to put your into is also something that you need to keep in mind while choosing an investment option. This will help you figure out your risk appetite.
While investing in a short-term fund, you should always put in efforts to understand the market you are entering. Observe carefulness while buying single stocks. And if you have already bought such stocks then make sure you monitor the companies regularly in which you have your money invested. Also, you shouldn’t park all your money in one company’s stocks. If that company faces loss then you will lose all your money. You should invest in stocks from a variety of companies from different sectors. And if monitoring looks like a real daunting task, then it would be valuable for you to invest in a couple of mutual funds that spread your money across stocks from different well-performing companies.
So, the mantra for making short-term investment is that you must avoid putting all your money into funds having a short-term horizon. After all, they are a little risky!
Striking a balance -
Good investment is all about balancing. Finding the right balance for you and your individual situation is key here. Also, try to spread out your holdings across businesses and types of businesses. Your financial goals should help you determine the best course of action.
Mr. Ajay Kumar Jain, M.Sc, Chief Managing Director
Being the Chairman cum Chief Managing Director, he focuses on holistic investment planning and wealth management and tries to make investment planning simpler for retail and HNI investors. Investor education is one of the prime things that Mr. Ajay Jain focuses on as he believes financial education is the foundation of successful investing. With over two decades of experience, Mr. Jain has made a mark in the Indian mutual fund industry due to his compassion and sheer hard work.