When it comes to an investment strategy, you can take an endless number of paths. You can follow any established formula or set your own path depending on your overall priorities, needs, and values.
One path that has numerous benefits is long-term investing. In long-term investing, you put your money in an investment with the goal of leaving it there for an extended period of time. You’re not buying and selling your stocks quickly based on the whim of the market or trying to take advantage of opportunities. Instead, your money sits in the investment and grows over a long period.
Here are six benefits of long-term investing.
It’s less emotional
It’s easy to get frustrated over every high and low in the stock market and worry that you should be moving your money around to take advantage of each trend. When you invest long-term, you don’t have to think about those things. You won’t need to worry if stock prices drop a small amount in the short term because you’re focused on the future. By having a long-term investment, you will be more concerned with the viability of a company’s business model or its overall growth strategy rather than whether a bump in an overseas market causes a one-day drop in value.
Your portfolio will almost certainly gain value
Portfolios tend to grow in value over the long term. If you buy and sell based on downtrends in the market, you could bet right that the stock will or won’t increase in value again, but you could also be wrong. If you stay with your stocks that tend to increase in value and continue to hold onto them even over small drops, chances are they’ll readjust and continue to increase in value.
Lower tax liability
Short-term traders who have their investments for 365 days or fewer pay higher taxes. Long-term capital gains taxes tend to be lower. Investing long-term means, you’ll likely be paying fewer taxes than active traders. That’s more money in your back pocket, or at least in your account.
You’ll pay less in commissions
Active trading can quickly allow commission fees to add up, especially if you’re a day trader. As a result, you could pay thousands of dollars in commissions each year. By investing long-term, you may only pay a small commission fee a few times a year, but your gains will more than likely cancel out those costs very quickly.
You can compound your earnings
Long-term investors enable you to compound or reinvest your profits over time, giving you an even higher return on your investment.
Anyone can do it
When investing short-term, you have to take advantage of the economic conditions and make or sell the right investments at the right time. That takes knowledge and in-depth planning.
When investing long-term, you can invest in a few companies and carry on with your life. There’s no need for you to be constantly checking the stock market to figure out what you need to sell or buy on a daily basis, and you don’t have to understand a lot about the market or have extraordinary insights. All you need is patience.
Final thoughts
There are endless strategies out there that you can use to invest your money, but the one that will provide you with the least stress and requires the least amount of expertise is long-term investing.
If you have any questions, feel free to Join the conversation…