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Investment | July 02, 2019

Short term returns or long term returns what should be the goal?

While taking the first step towards investments, it is of utmost importance to specify your goals of investments. Whether you want to invest to meet the expected near future expenses or you want your far-sighted life goal to be achieved.

There are broadly two paths to achieve any of your goals: short-term and long-term investments. Let’s dive a little into each and understand what should be your motive of investment.

What are Short-term investments?

The returns on your investment expected to achieve within a stipulated time frame ranging from 7 days to less than a year are known as short term investments. These are for the risk-averse individuals who want high liquidity and relatively lesser returns than any long-term investments. These are focussed more on the conservation of capital rather than growth.

There are a variety of products available in this category: fixed deposit, recurring deposit, debt mutual funds, etc.

What are long-term investments?

A long-term investment is focussed on your long term goals and the period of investment can go up to years. This type of investor is not much concerned with the near-term ups and downs of their investment fund but keep their eye on the return that they expect to achieve after holding them for several years. The idea behind these funds is not to get panicky when the stock value drops and must restrain to sell at such point.

Most of the high yielding funds from Mutual Funds India and equity share investments are aimed to be a long term only.

What should be your goal?

The goal of your investment depends on the following factors which include your time constraint, your liquidity requirement, any specific preference, your risk potential, and reward expectations.

If you are a risk-averse investor who might require funds in a year should go for debt mutual funds. However, if you are not sure about your goals, there is no such investment like that of a long term one. Robert G. Allen, author of one-minute millionaire says:

"How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case."

While concluding, your focus of investment can be both short and long term. You might earn a small trading return from short term investment while getting yourself invested for the longer term to attain that phenomenal return. Importantly, whatever your goal is short or long, try and keep your strategy separate for both.

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