Investors who know the common advantage of long term investment tend to enjoy happier, less stressful, and more profitable lives than those who don’t know. It’s not some great secret or complex formula, either. Just sound and practical advice that you too can implement in your life.
In this article we take a look at this advantage, and some of the other main reasons you should consider making long term investments your priority. It has worked for thousands of wealthy individuals, and it can work for you, too.
One Common Advantage Of Long Term Investment
One common advantage of investing long term is that it decreases the risk of volatility. This is something that the rich learned a long time ago, and something most traders learn the hard way. It’s easy to get blinded by the dream of high returns when trading, but these investments always come with high risk. Leveraged traders in particular can lose everything very quickly if they are not extremely careful. High volatility in crypto can cause hundreds of millions of dollars worth of liquidations in a single day.
The stock market is not as extreme as crypto, but flash crashes still wipe out portfolios more often than traders would like. When investing in stocks, metals, or crypto, volatility will always exist.
The only way you can avoid it effecting you is to make a long term investment, or find an asset class immune to volatility. Forestry or green energy solutions, for example.
Take The Stress Out Of Investing
Image Source: Shutterstock/Dejan Dundjerski
Perhaps the best reason to invest long term is the lack of stress. Positions in stocks or crypto require constant maintenance. You need to stay up to date with both the market and the companies that you’re invested in. This requires time and effort that could be more enjoyably spent elsewhere. Watching as a leveraged trade turns against you is one of the most stress inducing and sickening feelings imaginable.
When you are investing long term you can simply set and forget. This is true for long term stock market investments and particularly true for forestry investments.
Invest in truffle producing trees and your work is done the moment you make the investment. The truffle trees are carefully cared for under the watchful eye of our expert scientists and farmers. We look after everything from growing to harvesting and selling.
Once a year you will receive your money from the harvest. While you are enjoying this money you can rest easy knowing that this income stream will be working for you decades into the future.
Pay Less In Fees And Taxes
Whether through trading fees, or taxes, short term investments usually require more money in expenses. Short term traders who hold their assets for less than a year, are particularly hard hit. These traders have to pay as much as 40% tax on their profits.
In contrast, long term holdings are much more reasonably taxed. They can even be tax free in some cases. The worst case scenario would be around 20%. This is a significant saving and tips the scale even further towards long term investments.
It’s not just taxes, either. Commissions are another expense you can avoid by investing long term. Traders often pay huge amounts of commissions each year thanks to the high volume of trades they make. With the right long term investments your commissions will be insignificant compared with your profits.
Anyone Can Do It
Making short term investment requires, as Liam Neesen would say, a very particular set of skills. Investing in stocks requires a knowledge of technical analysis. This kind of knowledge is hard-won and usually comes at personal expense. Traders also need to develop a risk management strategy and work out the best leverage rate for their goals.
Once all this has been done, they will need to understand the macro economic picture. A setup that is perfect on technical analysis will fail to work out if the overall market makes a strong move in the other direction. With all things considered, it’s little wonder only 8% of traders are profitable.
Fortunately, long term investments are open to everyone. You just need to select the investments that you like and then do nothing. Don’t be concerned about fluctuations. Simply check back every year or so and see how its doing.
If your investing in the stock market, you can use a financial advisor to steer you in the right direction. If you are investing in agriculture, you can do the sums yourself, and see how they add up. If you’re investing in forestry such as truffle producing trees, all the work is taken care of. The only thing you need to think about is what to do with your money.
The Numbers Are On Your Side
When you invest long term, you have the chance to get it very right. An agricultural investment like truffle producing trees, for example, will pay out every year for decades. You can expect to receive more than the average 10% too.
Stocks are more of a gamble, some will always go wrong, for whatever reason. But the ones that you get right will keep rising in value for as long as the company is successful. Look at the price history of successful corporations and you will see that this is true. Sure, there will be some years where the stock value falls, but over the long term the prices just keep going up.
What About Short Term Investments?
Investors with a high tolerance for risk can make some short term investments to compliment their long term investments. If you don’t mind the stress and know what you’re doing, you can benefit from this extra level of diversification. Who knows, you might strike it lucky and generate extra funds for your long term investments.
For most people, long term investments remain the best course of action. Long term investments are the safest and surest way to generate sustainable returns. Not only that, but they are largely stress-free, potentially putting extra years onto your life.
We believe that truffle producing trees are one of the best long term investments on the market. As well as providing an important level of diversification to US investors portfolios, it’s a green and sustainable investment that benefits the environment.