Benefits of Long Term Investing
There are many benefits to investing over a long period of time. These benefits include compounding interest, avoiding taxes and more.
The most obvious advantage of long term investments is that they can produce higher returns than short-term investments. This is because short-term investment strategies tend to be highly sensitive to market movements and can often result in losses whereas long-term investing is less susceptible to these fluctuations.
Another important advantage of long term investing is that you can earn a dividend. This can add to your overall return by making your money work harder and increase its value over time.
During periods of severe stock market declines, it can be tempting to jump in and out of the markets to try and boost returns. However, doing so could hurt your portfolio if you miss out on some of the best days in the market.
You can also avoid paying brokerage fees and capital gains tax by investing in longer-term investments. In fact, if you have held your stocks for over a year you can defer capital gains tax and save up to 20% on your profits!
Besides these advantages, long term investing can help you protect against losing too much money because of volatility. This is because, historically, the returns of different asset categories have not moved up and down at the same time.