With the current economy shrinking and unemployment looming around 10%, people are growing worried about their investments. Though there are some investing in short term investments because of the pandemic, people are actually putting money into more long term investments just as a precaution. In this article, we will be highlighting some of long term and short term investments that you need to know about, what exactly this is, and why you should get involved now.
Maybe as a child someone in your family gave you a piece of paper that said “U.S. Treasury Bond” and you asked yourself “What is this?”. Well a Treasury Bond is a type of investment, you are essentially giving the government your money and they are investing it but you have to hold that bond for a specific amount of time so you can cash it out and get your money back. But the catch with bonds is the longer you hold them the more they are worth.
So with that being said this is why bonds are usually a long term investment because you want to hold them so that way the interest will continue to pile up on it. With the interest piling up this will make your bond worth more which then means you will get more money in return when you cash it out.
Also bonds are distributed by corporate companies not only by the Federal Government. Bonds are extremely safe because the person who issues the bonds has years to pay that debt which is why companies do not really default on their bonds.
Another long term investment is Mutual Funds which is essentially a group of stocks that ends up making an entire fund. There are thousands of mutual funds out there, all them relatively safe because they are made up of multiple stocks instead of just one. There are mutual funds that track an index. Which means they follow an index like the S&P 500, NASDAQ, or the Dow.
These funds are extremely long term because of their safety, index funds track these huge indexes that have huge growth over 10 years, 15 years or 20. Since they are made up of multiple stocks they tend to grow because the fund is diversified which means the money is put into multiple investments not only one. Some of the money could be in stocks, bonds, and some may be in cash. These huge funds are managed by a fund manager who is appointed by the company that runs the fund and the people who invest in the fund.
These funds are extremely long term because of their safety, index funds track these huge indexes that have huge growth over 10 years, 15 years or 20. Since they are made up of multiple stocks they tend to grow because the fund is diversified which means the money is put into multiple investments not only one. Some of the money could be in stocks, bonds, and some may be in cash. These huge funds are managed by a fund manager who is appointed by the company that runs the fund and the people who invest in the fund.
These companies consist of Schwab, Vanguard, Fidelity and other corporations. There are many types of mutual funds it just depends on what you want to invest in.
ETFs are also another long term investment, which has some characteristics like a mutual fund but they are different. ETFs or Exchange-Traded Funds are actively traded like stocks and their price moves throughout the day while mutual funds their price only moves once per day because they are bought and sold once per day.
Also mutual funds are priced based on the NAV, Net asset value which essentially means the amount of all the investments in that fund. ETFs are considered to be somewhat equal in safety to mutual funds because they just track an index so whatever that index does that ETF will do. While mutual funds are managed by someone ETFs are not they only follow indexes.
Short Term
After stating most of the long term investments now it is time to list the short term. Which mostly consists of stocks, some bonds, CDs, and online savings accounts. Though for the most part bonds are long term investments there are some bonds that you can get that you only need to hold them for 6 months or 1 year.
With CDs or Certificate of Deposit is an investment offered by banks that you give you higher interest rates because your deposit is locked in for a specific amount of time. This means you can not touch that deposit and if you do you will be penalized. Online saving accounts offer high interest rates because they are an online bank so they are essentially trying to make their online bank more appealing to people by offering a high interest rate on savings accounts.
Lastly, stocks are the short term investment that everyone knows because they probably give the best yield. Though they are riskier than most of the other short term investments they give the most money back. As they say “high risk high reward”.
Now that most of the long term and short term investment options are listed above, it is now up to you what you want to invest in. If you want to take on that risk and make money in a faster amount of time then short term investments are for you.
But if you like the safety and overtime person then mutual funds or bonds are for you. At the end of the day, it is really just based on whether you want that risk or not.
Thank you so much for reading!
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