Short-term or Long-term Investment Plans – Which One Works Best For Me?

“Short-term mutual fund can be a great tool to save money.

Mutual funds require patience. They take time to produce results.”

People looking to invest in mutual funds are often confused by the statements above, which contradict each other.

It doesn’t matter if you are conservative or aggressive, have low or large amounts of money to invest or have a long or short-term financial goal. The wide range of mutual fund investment options in the bucket offer something for everyone.

You can choose from a variety of mutual funds depending on your risk appetite, investment volume, and time horizon to achieve both short- and long-term monetary goals.

Let’s look at the top short-term and long-term investment options you can use to your advantage.

The Basic Differences between Short-Term Mutual Fund Investments

According to financial experts, short-term mutual funds investments should be liquidated within three years. Experts agree that investments that are kept for more than five years are considered long-term.

Evidence shows that investors are more likely to stay invested in mutual funds for a longer time, because they often benefit from compounding. Investors are willing to consider short-term investment plans, as there are many options.

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It is crucial to remember that selecting the right funds is key to successful mutual fund investments, particularly if you are investing for a short time.

Mutual Funds for Short Term Investments

Liquid funds and debt funds are the best options for short-term mutual funds investments that last from one month to one years. Both can yield higher returns than savings accounts, which typically offer around 4% interest.

Because certain bonds can yield a higher yield than traditional savings options, short-term investments can often deliver greater returns than bank fixed deposits.

However, mutual fund investments can’t guarantee a fixed rate return, whether it is short-term or long-term. Mutual funds are subjected to market risks.

Long Term Mutual Fund Investment

If you’re looking for long-term investments that will last for five years or more, equity mutual funds are the best option.

Two benefits come with long-term mutual funds investments. You get tax benefits as long-term mutual fund investments are held for at least one year. This allows you to qualify for tax exemptions. You also get the significant benefits of compounding which allows for capital appreciation.

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It is important to note that returns on equity mutual funds may vary in their rates of return. You can get an annual return of 20% on your investments in some years. However, the annualized returns for certain years may be lower than fixed deposit rates.

Historical data suggests that long-term mutual fund investments can yield lucrative returns.

Mutual fund investments are flexible because you can design your portfolio with either short-term or long-term funds depending on your financial goals. This allows solid investments to be made that offer higher earning potential than other investment options.