In my opinion, the word Investment itself refers to long-term. Anything that is not for a long period of time is not an investment, and I call it trading. Long term investments require a large amount of patience, but the result is twice as large. I’m sure you have heard of the 8th wonder of the world – Compounding!
Compounding is the term that symbolizes the exponential growth of your investments. Your invested money compounds according to the time you decide to stay invested, and the graph is exponential rather than linear.
The only downside of long-term investments is that you won’t see any major changes for the first few years, and it is only after a fairly large time that you see the graph going up. In this article, I am jotting down everything I know and am thinking of long-term investments.
Table of Contents :-
What are Long Term Investments?
Long-term investments are the investments that you do not sell for a fairly long time, say 10 or 20 or 30 years. You buy and hold, and at times, long-term investments are not sold at all. You may have seen many examples where the first generation invests in real estate and individuals from the second or third generation reap the benefits. This can be termed as an example of a fairly long-term investment that was never sold!
But that’s a long stretch. More practical Long-term investments are the ones where people start investing at a young age and reap the benefits at the time of retirement. Such investments, where you buy and hold for years, help you retire early and enjoy life.
For you to be a long-term investor, you need to have a tremendous amount of patience. You also need a will to accept a certain risk factor. If you have these two traits – Patience and Daring, you’ll see the real power of compounding. The factor of risk can vanish completely if you study the market and gain basic knowledge.
Study, plan, invest, and you’ll only have to worry about the Patience factor.
What are your options for Long Term Investments?
In this article, I assume that you, the reader, are an individual who wishes to enter the game of investment.
So, for you to become an investor and invest for the long term, there are multiple options for you to invest in. You can invest in one or all of them. That is the decision for you to make. But there is a twist which I’ll tell you at the end of this article.
But first, let us talk about some of the most popular options of investing in the long-term –
Stock Market and Mutual Funds –
You must have heard about people who made it big in the stock market, and this is the reason that stock markets are the most popular investing options. More and more people are entering the market with a desire to earn a fortune.
There are various paths as to which you can opt according to your needs, taste, and knowledge. The easiest of all is to invest in Mutual Funds. Funds are based on equity, index, debt, and all. I won’t go in-depth on mutual funds.
Another way is to buy direct stocks. For this, you need to have some basic knowledge of stock market terminologies and the knowledge of picking up stocks. If you wish to invest in direct stocks, I recommend you read the below articles –
Stock Market Strategy.
However, my favorite way of long-term investment is a SIP (Systematic Investment Plan) in Index Funds. You don’t need to have much knowledge, neither do you need to keep up with the happenings of the market. The only thing you need to take care of is to ensure the SIP amount in your bank account and a pinch of patience.
PPFs and Government Bonds –
PPFs (Public Provident Funds) and government bonds are also considered as favorable long-term investment options. Moreover, these have certain upsides and downsides when compared to equity markets. The biggest upside of these investments is – They have a fairly low risk and favor people with a low-risk appetite.
As the risk is low, this leads to the downside. The downside is the returns generated. You may get good returns while investing in PPFs and bonds, but you can’t generate returns as good as you can in the stock markets.
Real Estate –
This is the most popular and widely preferred investment option for elderly Indian people. Most of the people during the last two decades invested in real estate and have reaped huge returns. As of today, the real estate sector can prove to be a huge long-term investment opportunity. Especially because of all the infrastructural advancements happening all around the world.
A good eye today can lay a foundation of more than 20% annual returns. People have gained appreciation more than 200% within a few years. The potential real estate holds can’t be described in words.
The only downside is the starting capital. One requires a fairly large amount of capital to get started in real estate investment.
To invest in One or All?
There are many more investment options which you can look up to. Such as Cryptocurrencies and NFTs. These two are fairly advanced and very popular investment options. However, the volatility scares most people off. I personally use these two categories for trading. I am not comfortable investing in these assets. At least as of now.
Now, should you invest in any one of these options, or should you pick multiple? The answer lies in the word – Diversification. This is the twist I was talking about. I’m sure you must
have heard of this word before.
But if you want it short – Invest in as many assets as you can. Diversifying your portfolio will help you in many ways. Invest in multiple assets and remain invested for as long as possible. A diversified portfolio of long-term investments can make you wealthy in a way you can’t imagine.
The next article will be a list of steps and strategies to start your long-term investment journey. Till then, if you have any questions or queries, hit me up via the contact page. Or text me on Twitter, I’m most active here – @sushrutkm