3 Advantages of Long Term Investments
If diversified investment is the key concept of asset protection, then long term investments provide a foundation for an investment strategy. We summarized the advantages of long term investments into the following 3 points.
1. Minimizes the transaction cost
Trading in securities generally involve transaction costs such as fees and taxes. By developing a solid investment strategy in advance, you can minimize unnecessary transactions and enhance investment performance.
* The values "with transaction costs" are calculated using values of monthly investment performance minus 1% across the board.
* Taxes and other costs are not included.
2. Adds discipline
In short-term, timing the market leads to profit, and conversely, timing wrongly results in loss. Moreover, one will be swept away when facing a loss, but be satisfied with smaller unrealized gains. If you cannot predict the future with your crystal ball, disciplined long term investment may be the preferred approach you might want to take.
3. Amplified effect of compounding
The longer the investment period prolongs, the higher the effect of compounding shall be. Committing your capital and proceeds in a long term investment helps to grow your asset faster, provided that there is a positive return during the investment period.