Long Haul or Short Hop

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The choices

Most of the time, it’s best not to look at investing as a means to accumulating large sums of money in a short space of time. Of course, it’s not an impossibility but for most investors – institutional or private – the exercise is best undertaken over the long term.

As a hard and fast rule, a long-term investment typically runs over a 10-year period or more while a short-term one runs for 3 years or less.

Long-duration investing

Investing over the long term tends to be favored by value investors because, firstly, it often takes years for undervalued assets identified today to yield the desired returns. Secondly, market cycles tend to run 7-10 years giving less successful investments time to turn around or even out dips in performance.

Typical targets for long-term investment tend to be bonds, equities and index funds linked to the performance of benchmark indices like the Dow Jones Industrial Average and the S&P 500. These investments can be held over the short-term but doing so profitably places greater emphasis on the issue of timing both in terms of entry and exit. That type of investing is best left to professional traders.

Short-duration investing

As the name suggests, short-duration investing revolves around holding assets or securities for shorter periods with a view to generating profit relatively quickly and moving onto the next investment. Typically, investments classed as short-duration are not held for longer than 3 years and, in today’s market environment, they can be acquired and disposed of within minutes.

All asset classes including stocks, bonds and currencies can be traded over the short-term but this type of investing carries far higher risk of capital depletion. Skilled professionals like those at JC Rothchild General can generate high returns for clients and investors willing to expose their capital to higher levels of risk in return for faster profits.