Evlooy.me – 5 Examples of Long-Term Investments, Know the Objectives and Types, A long-term investment is one that is made over a long period of time, typically many years. Some people make long-term investments in order to save for the future or retire.
In general, investment has financial implications especially in tangible investments. For example, investment in gold, diamonds, land, buildings (property) or other commodities that can be marketed.
Some of these types of investments will certainly form the market value. Market value serves as an indicator of fair value determination.
Short-term investment and long-term investment are the two types of investment in terms of time. Detikers, you should understand the distinction between long-term and short-term investments.
The distinction is visible not only in the time period, but also in the recording of transactions. In this article, we will go over the definition of long-term investment, as well as the goals and examples of long-term investment. Look at this!
What is Long-Term Investment
Long-term investment means an investment where the funds entered will be rotated, and can only be disbursed after a minimum period of one year. So, people who make long-term investments do not plan to withdraw that investment in the near future.
Why? The reason, because they know that they can withstand it, to the ups and downs of the market.
Reported by the personalcapital page, long-term investments differ from short-term investments in several ways. For example, when people invest short-term, they may often turn to low-risk investments.
Generally, because they don’t have time to wait for the market to recover or bounce back. On the other hand, long-term investments tend to have higher volatility (statistical changes in security prices over a certain period).
The nature of long-term investments include:
- Investment storage that has a maturity of more than a year
- Investments made in a certain form
- For companies, including part of company assets
- For companies, as a means of strengthening business relationships (trade benefits)
- The purpose of investment is to seek profit, increase wealth or other purposes.
Long-Term Investment Goals
The following are long-term investment goals:
- Get fixed income in each period. (such as interest, dividends, royalties and others)
- Establishing special funds for certain interests
- In anticipation of being able to continue the company’s life or operations
- Utilize excess unused cash, as a means to increase wealth.
5 Types of Long-Term Investment
1. Precious Metal Investment
The most popular precious metal investment is gold, because gold can be accepted by the general public. Gold is a precious metal whose value is 99.99%.
In addition, gold can also be formed into jewelry. For some people, gold investment is a safe investment tool.
Gold has a selling value that tends to be more stable. Gold can also be easily cashed at any time when we need it.
2. Stock Investment
Companies can also get capital from investors by issuing shares. In short, the notion of shares is evidence of ownership of a public (public) company. Shares are traded on the stock exchange.
There are ways to profit financially from stocks. First, you can maintain or increase your share ownership position when the shares you own are rising in value. Second, you can sell the stock during retirement for far more than you bought.
The share of profits received by shareholders is called dividends. Long-term investment in stocks allows for higher income than bond interest rates, if the company earns high profits, and vice versa.
The advantage of investing in shares is that the largest shareholder can vote as the owner, which means that he can determine company policies. The larger the shares owned, the greater the contribution that can be made in the decision-making process at the general meeting of shareholders.
Investors can choose various sizes of company shares, including:
- Large cap stocks
- Mid-cap stocks
- Small cap stocks.
3. Mutual Fund Investment
A mutual fund is a type of investment that raises funds, from many investors to buy a number of underlying assets. Mutual funds are an indirect investment instrument that can be used as an alternative for small investors.
In the e-book Introduction to Business by Hakim Simamora, the large amounts of funds collected from investors will increase the bargaining power of a mutual fund company.
4. Property Investment
Property investment is also one of the most popular long-term investments. This investment can make a lot of money, when the property you own improves over time or is the same as real estate has done historically.
One of the advantages of investing in property and real estate is that we can make investments, with bank money with a fairly low interest rate. In addition, investing in property or in the form of buildings can also allow you to get a recurring source of income from rent.
Unfortunately, the weakness of property investment is that it is highly illiquid. Property investment is intended for future expansion purposes.
Income from the investment of these assets, in general, is taxable income and also the profit if the investment is sold.
5. Deposit Investment
Time deposits are time deposits issued by banks with the permission of the Bank as evidence of deposits that can be traded or transferred to third parties. Deposits can be guaranteed to get a loan from the same.
The advantages of investing in deposits include higher interest rates compared to savings interest rates, high liquidity and can be withdrawn at any time (although there is a time period and penalty fees). Interest is paid in advance, in the sense that it is deducted from the price at the time the certificate of deposit is purchased.
Thus an explanation of the objectives to examples of the type of long-term investment. After reading the explanation above, which type of long-term investment are you interested in?