Sometimes, when it comes to financing, there are a lot of terms that have different implications in different parts of the investing spectrum. When it comes to equity, a long term equity investment is something that is often overlooked by investors. By selecting the right tenure for long-term investments, one can reap good benefits off of a long-term equity investment. But what is the proper tenure for a long-term investment? This article will attempt to answer that question for you.

The consequences of doing nothing

According to a survey in the US, being dead could be one of the best strategies to get good returns on equity. Why? Well, according to the study, many investors found that their wealth had multiplied by huge amounts when they had simply just left their money and forgotten about it. A lot of these investors were dead, but their money had still grown. This ironic example serves the purpose of portraying the long-term gains of investment.

Long-term value of money

According to the government of India, a holding period of less than 12 months is definitely termed as short-term. However, when it comes to long-term, there isn’t any specific limit or value suggested for long-term loans. How long is long-term can vary from person-to-person. It is usually said that long-term is best when it cflong term equity investmenomes to equity. This is because the longer the term, the more the investor will benefit from the power of compounding. If the option is risk-free, it can give a more assured growth rate. Money usually multiplies in the later years, generally after the 7th year. A long term investment gives a much more clear view of stocks. Also, in long-term stocks, fundamentally strong stocks, can exhibit upward trends. Strong stocks require extra care to maintain their competitiveness in the market. This is often accomplished by the expansion and modernisation of the companies. All of this takes time, and that’s why these projects take a minimum of 5-6 years to show any positive changes. Therefore, a minimum of 5-6 years is essential when you consider long term investment. Long-term holding lets you experience: the certainty of returns, higher returns, and the power of compounding.

Short-term value of money

Generally speaking, a holding period of less than three years is considered to be short-term. Because of stock prices and their volatility, short-term investments are riskier. Equity returns are plagued with uncertainty in the short-term, and it is long-term that helps take this uncertainty away. The longer the holding time on the investments, the better the quality of returns.

Conclusion

To sum up all the insightful bits of information given above:

–    The longer the investments are held, the better

–    A holding period of three years comes with a lot of risks

–    5-7 years of holding time seems perfect for a long term equity investment

Remember to use your expertise and common sense when making investment decisions. Spend wisely!