The investment market constantly revolves around growth and safety. On one hand, where an investor wants investment plans that provide growth, the other hand he/she wants the best investment plan that provides safety. However, in the current scenario, most of the safe investment plans may lose money because of inflation. This is the point where growth becomes most important. Even though they are risky, but the long-term investment strategies and plans overcome these risks and grow the money of the investor in the time period.
Why Long-Term Investments and What are the Best Options?
When short-term investment plans are thought of as capital preservatives, a long term investment plan is for wealth creation. It is more about building a portfolio of investment that can provide the investor income in his/her later life or for fulfilling his/her long-term goals. These goals can be the retirement of the investor. However, this is possible only when one creates the wealth that is necessary for providing the level of income that he/she may need to survive in the future.
Basically, long term investment means taking some amount of risk in order to get higher rewards. This can be possible by investing in instruments like real estate and stocks. These investments are considered as the because of their capability of capital appreciation.
These investments thus are required to make up the majority of the allocation of a long-term portfolio of the investor.
An Investor Must Ride the Roller Coaster
The major risk with long-term investment instruments is that they can anytime fall in their value. Even though some of them are equity investments, and do not have a guarantee of principal.
However, since an investor holds these investments for a long-term, they have a chance to recover. For example, a long-term investment instrument may be down, say for 20%, in the next five years, but it could be doubled or tripled in its value in the coming ten years.
Maximize Investment Returns
Instead of selling stock in 50% profit after five years, one should instead hold on for a long time to get profit equal to 100%, 200%, etc. These types of returns one can expect when one becomes a long term investor. There are many such investment instruments that can make this happen very easily.
There are many asset classes that have different risk levels. Since there is no proper way to know which investment instrument performs well or which can avoid losses in the near-term, the best strategy for the same is to invest in almost all the instruments at the same time.
In many ways, stocks are considered as long term investment instruments. The advantages of having this best investment plan are:
- The stocks are basically the paper investment and one does not have to manage them like some business or property.
- Stocks raise their value, most of the times over a long period.
- Generally, the stocks show the ownership of the profit-generating company and by investing in it one invests in the economy.
- Most of the times, the stocks pay the dividends and provide an investor with a steady income.
- By purchasing the shares of different industries and companies, one can spread his/her portfolio of investment.
- Most of the stocks are liquid in nature and let investors sell them easily and quickly.
- One can invest in stocks of international companies.
Equity Mutual Funds
The equity mutual funds primarily invest in the stocks of equity. A scheme of equity mutual fund invests minimum 65% of the assets in equity-related instruments and equities. One can manage an equity fund passively or actively.
Investing in the stock market is not a cup of tea for all because of its volatile nature. Moreover, it is not only difficult to select the right stock instead of the timing of exit and entry is equally important. Therefore, in order to reduce the risk of investment to some extent, one can start investing in direct equities. To start investing in direct equities, an investor has to open a brokerage account.
Debt Mutual Funds
Debt funds are ideal for those, who want to keep investing in steady returns. These funds are less volatile in nature and therefore are not as risky as equity funds. These funds basically invest in fixed income generating securities such as government securities, corporate bonds, etc.
Bank Fixed Deposits
Investing in bank fixed deposits is one of the safest choices. According to the requirements of the depositor, one can opt for yearly, half-yearly, quarterly, monthly, or cumulative option for interest. The earned interest rate is added and is taxed as per one’s income bracket,
It is most of the time is known as an alternative of stocks while we talk about long term investment plans. The reason for the same is similar kind of returns as the stock does.
The Bottom Line
Apart from the above mentioned best investment plans, people can also invest in gold, taxable bonds, etc. While some of the schemes are fixed-income some are market linked. Since both the strategies of investment play an important role in creating corpus in the long term, thus one should have a good balance of both the types.