John Labunski - 4 must-see long-term investment tips

by John Labunski The Broke Leading the Broke

Long - term investments are made with the future in mind. This means that they typically face more market fluctuations and also generate a greater accumulation of equity due to their longer time frame. Due to their characteristics, these investments require strategy and patience to generate the expected results.

With that in mind, check out four unmissable long-term investment tips below, and see how to make them even more beneficial!

Evaluate profitability over time

When it comes to long-term investments, it is essential that you take extra care with profitability. This is important because the longer the term of the investment, the more unpredictable the scenario is and, therefore, the more risks are involved.

If you invest in long-term fixed income, for example, you need a return that brings more security for this longer period. Because of this, indexing your investment to the interest rate is not a good option, because in a good economic moment this rate will be low.

Attaching it to inflation, in turn, guarantees at least that you don't lose purchasing power, especially considering the instability of the United State economy.

Do not disregard the lack of liquidity

Another tip to succeed in long-term investing is not to disregard the lack of liquidity. This feature is one of the disadvantages of this type of investment and has an important impact on your budget.

Making this consideration is necessary because the longer the investment term, the lower the liquidity and the more immobilized the investment will be. As in these cases, withdrawing ahead of time usually leads to a loss of money, you need to consider what your capital need is to invest an amount that you will not need to use within the long term.

Benefit from the lowest tax payment

If the lack of liquidity is a disadvantage, it generates an important advantage: the payment of a lower tax rate. This is basically due to the fact that most investments have income tax charges according to the regressive table.

This means that the longer you leave your money invested, the lower the amount you will need to pay in tax when you withdraw it. With that, when making a long-term investment, plan to leave the money immobilized for at least two years - this will reduce the IR payment by almost 10%.

Diversify your investment portfolio

Precisely because they are unpredictable, long-term investments do not allow you to know for sure how much you will earn — the only exception is fixed-rate investments. Because of this, it is very important to turn this possible downside into a diversification of investments.

By allocating your resources in different applications and with different risks and returns, you ensure that over the years there is a compensation of losses and gains, which helps your assets to remain safe and make your investments more profitable.

Although they have disadvantages, such as lack of liquidity and unpredictability, long-term investments also bring benefits, such as the possibility of building more wealth and lower tax payments. Therefore, among the unmissable tips are analyzing profitability in the right way, taking the lack of liquidity into account, leaving the investment for longer and diversifying your investment portfolio in order to guarantee the expected results.

Still have any doubts about what to do with long-term investments? Don't forget to comment and participate!

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