Long Term Investments

Investing for the long term involves much more than just buying assets and holding them for a long period of time. Anybody can make an ad hoc purchase of an investment vehicle and wait for its value to appreciate, but an investor who adopts a long-term investment strategy will formulate a clear and complete plan that can be implemented over a period of years to create wealth that endures in the face of market volatility and economic cycles.

The 6th Avenue Team works with investors who appreciate the value of a long-term investment strategy. Before we formulate a wealth management plan for our clients, we conduct detailed intake meetings to understand their investment psychology and wealth management needs. We then invite our clients to participate in one or more echo sessions in which we fine tune our mutual understanding. Finally, we will recommend and implement an optimum investment plan that will satisfy those expectations in the long term.

What Are Long Term Investments?

A long term investment is generally any asset that an investor holds for one year or more. Contrary to some perceptions, a long term investment is not necessarily an asset that will be held indefinitely or that will never be sold. Any investment asset may reach a point at which the returns it generates begin to decline or its rate of appreciation begins to drop off.

It is the job of the financial advisor to:

Identify those assets that have strong prospects for cash flow and appreciation over a period of time, and

Determine when that asset has reached its maximum potential within that client’s long-term plan.

What Types of Long Term Investments Are Available?

Almost any type of asset that is held for more than one year can be considered a long-term investment. The more critical consideration is determining whether that asset fits within the overall investment plan.

Long-term investment examples include:

Equities. Shares of stock or interests that represent ownership of publicly traded companies can generate regular returns through dividend payments and long-term growth as the value of the underlying company grows.
Bonds and Debt Instruments. Corporate or municipal bonds that are purchased at a discount off of their face value will generate long term growth as they approach their maturity date. Bonds offer an objective rate of return, but can also lose value if interest rates increase over a longer period of time.
Mutual Funds and ETFs. Funds reduce long term investment risk by pooling groups of assets from specific markets or industry sectors. Economic conditions that affect a small number of those assets will generally not have an adverse impact on the fund as a whole over a longer period of time.
Real Estate. Real estate holdings, either through direct ownership of commercial or residential property or indirect ownership via real estate investment trusts (REITs) are a classic long-term investment product. Real estate investments are less liquid than stocks, bonds, and funds, but can offer more favorable tax benefits in the context of a well-defined long-term investment plan.
Alternative Investment Vehicles. Long term investors will frequently allocate a small portion of their portfolios to gold or other hard commodities. These may be more speculative long-term options, but they can be incorporated into a wealth management plan as a means to offset swings in currency values, inflation, and other external economic risks.

What Are The Benefits of Long-Term Investments?

Investors who seek management of their assets and wealth according to a solid plan will derive multiple benefits from a long term investment strategy.

Reduced Exposure to Market Volatility. Short term swings in market value can destabilize a poorly-planned portfolio. Investing for the long term counteracts that instability.
No Emotional Decision-Making. Investors who adhere to a long-term plan can eliminate bad investment decisions that are driven by emotional responses to immediate or transient market conditions.
Reduced Transaction Costs. Day traders and other short-term investors face higher commission costs and fees in an active short-term trading environment. Long-term investors avoid these fees.
Tax Advantages and Efficiency. Long-term investors pay lower tax rates on capital gains, rather than regular income tax rates that are applicable to income and revenues from assets that are held for less than one year.
Planning for the Future. Wealth only has real value when it is used to support the investor’s goals and desires. Long-term investing in accordance with a detailed plan will enable an investor to meet those goals and desires.