| July 02
Short term returns or long term returns what should be the goal?
While taking the first step towards investments, it
is of utmost importance to specify your goals of investments. Whether you want
to invest to meet the expected near future expenses or you want your
far-sighted life goal to be achieved.
There are broadly two paths to achieve any of your
goals: short-term and long-term investments. Let’s dive a little into each and
understand what should be your motive of investment.
What are Short-term investments?
The returns on your investment expected to achieve
within a stipulated time frame ranging from 7 days to less than a year are
known as short term investments. These are for the risk-averse individuals who
want high liquidity and relatively lesser returns than any long-term
investments. These are focussed more on the conservation of capital rather than
There are a variety of products available in this
category: fixed deposit, recurring deposit, debt mutual funds, etc.
What are long-term
A long-term investment is focussed on your long
term goals and the period of investment can go up to years. This type of
investor is not much concerned with the near-term ups and downs of their
investment fund but keep their eye on the return that they expect to achieve
after holding them for several years. The idea behind these funds is not to get
panicky when the stock value drops and must restrain to sell at such point.
Most of the high yielding funds from Mutual
Funds India and equity share investments are
aimed to be a long term only.
What should be your
The goal of your investment depends on the
following factors which include your time constraint, your liquidity
requirement, any specific preference, your risk potential, and reward
If you are a risk-averse investor who might require
funds in a year should go for debt mutual funds. However, if you are not sure
about your goals, there is no such investment like that of a long term one.
Robert G. Allen, author of one-minute millionaire says:
millionaires do you know who have become wealthy by investing in savings
accounts? I rest my case."
While concluding, your focus of investment can be both short and long
term. You might earn a small trading return from short term investment while
getting yourself invested for the longer term to attain that phenomenal return.
Importantly, whatever your goal is short or long, try and keep your strategy
separate for both.