If you have been in investments, you might have heard over and again about the importance of long term investment. You may be investing in mutual funds already and that could be long term too. But if you are someone who does not really know about the significance of investing in these funds for the long term then this post will get you a quick idea. Once you know why it is so, you would find it to be wise to invest for the long term.
Long term investments meaning
Patiently waiting for the money to compound and even form up wealth can seem frustrating once you begin. But the longer the journey, the brighter the light is going to be at the end. You know a long term investment may be really advantageous in several ways.
An investment is seen to be long-term when you simply hold it for as a minimum of a year or even more. Ideally, mutual type of fund investment plans held for three years or even more can be called long term. Certain securities such as the overall stocks, equity mutual type of funds , etc., may be much volatile in the short term. One way that you can simply lower the overall risk is to hold the investment for a long term. Relying on your overall goals, this might be three, five, 10, 20 years or even that of more. The long term works as a buffer against any sort of short-term market volatility and aids your money compound absolutely more, eventually creating a huge corpus for your goals.
You taste the Power of compounding
The power of compounding is one of the prime perk that you get when you go for long term investment in a MF. Actually what really happen is, the returns you earn from your investment get invested back into the market coupled with the principal amount. Such a thing considerably boosts your overall investment value over time and aids you in creating a huge corpus at the end of the term. The longer you choose to stay invested, the more returns you may produce with compounding.
Lower level of risk
Of course, you should not miss that a long term is going to help you ride out the highs and lows of short term market. It offers your money sufficient time to earn returns and expand without being hampered by short term fluctuations. Even if the investments you have slump in the short term, they are probably to bounce back in time. A longer-term simply gets you the room for your money to grow.
Less investment burden
Once you buy MF online or even otherwise for the long duration, you can go for easier methods of investments such as sips. A Systematic Investment Plan permits you invest smaller quantities at your pace or preferred frequency in a mutual type of fund scheme of your choice. Compared to any sort of lump sum investment, sips help you to break down the investment cost into more manageable as well as budget-friendly instalments.
So, whether HDFC mutual funds or any other funds; make sure that you stay glued to them for long term. It would be a wise thing for you to do for sure.