How finance folk use it
In its general finance usage, long term is a reference to a period of time that lasts 10 years or more. In investing, this can change according to the situation and needs of the investor and the type of investment product.
Is it good or bad?
Aside from being aware of your risk profile, knowing when you’ll need the money for your goal will help you choose the right product to invest in.
In general, the time involved in long-term investing makes it more likely that the product will be able to recover if it experiences the typical ups and downs of a market cycle. If the product provides interest or dividends, these can also accumulate better during a long-term period.
What it means for you
Time can enable a lot of benefits when investing. For example, many people have found that a long-term horizon can be effective in enabling high-risk, high-reward products to ride out a market cycle.
If you’re planning on doing long-term investing, remember also that this may help you reach a bigger goal without having to go beyond your acceptable level of risk. Of course, if you need to achieve your goal in less than 10 years, it would be better to choose investment products that have the best chance of reaching their full potential by the time you need the money.
