Investing is a great way to build your wealth. It is a must-do activity for everyone, without any exception. Investing in a disciplined way can work wonders for your personal financial health and is a must if you want to become financially independent and wealthy.

Investment can be made for the long-term as well as the short term. However, it is most beneficial when you can invest your money in high growth assets like stocks. So let us understand why long-term investment is the right choice for you and what are the advantages that you can get by opting for it.

Advantages of long-term investments:

1. It eases out the effects of volatility

One of the reasons why those who trade in the stock market or invest for the short term often end up in curing losses is because of the volatility in the markets. Excessive volatility can cause your investments to lose value, thereby giving you losses.

When you invest for the long-term the volatility gets averaged out. Investments held for the long term exhibit lower volatility, thereby increasing your chances to earn good returns.

2. It takes the emotion out of investing

If you invest with the short time horizon then you will have very little time to recover from any adverse movement in the price of the stocks you have invested in. Hence you will always be worried that you might incur losses on your investments. This feeling will make you jittery and you will end up taking irrational decisions which will further hurt your prospects of making profits.

1. 3. You earn more dividends

Dividends are a part of the total returns that you will earn. As you know, dividends are generally declared by companies once in a year. Hence, if you invest for the short term then you will either get no dividends at all or get it at the most once or twice.

However, by investing for the long-term you can earn divisions over multiple years. This will give you handsome returns in addition to the profits that you will earn from the price appreciation of the stocks.

4. You benefit from the compounding of money

The renowned scientist Albert Einstein had referred to compounding as the “Eighth Wonder Of The World” and you should take advantage of it too. The longer is the time horizon of your investment, the more is the benefit of compounding that you will get.

When you start investing early in life you will be able to invest for the longest term. This will also mean that the given effect of compounding will be the greatest. So start investing early and for the long-term so that your money can multiply manifolds.

5. No need to time the markets

You can start investing for the long term at any time without worrying about whether the stock price is right or not. Since in the long run most of the good stocks into appreciate healthily, you do not need to time your entry into the markets. So you can forget about doing complex technical analysis studies to find the right time for investing if you are investing for the long term.

All you need is the patience and the interest to hold your investments for the long run. Even if the markets fall after you have invested, you need not panic. This is because the stock prices will have adequate time to recover since you are investing for the long term anyway.

6. Helps In Avoiding greed and fear

The two emotions which are known to cause maximum loss to investors and traders are greed and fear. Both of these are common psychological traits which cause humans to behave irrationally and take actions which are not good for them.

Fear or panic is probably the most common reason why people lose money in the market. Generally people to panic easily. Whenever they see the stock prices going down or the markets crashing in general, fear grips them and they end up exiting the trade at a price much below their cost price. This unnecessary panic results in losses which become very difficult to recover later.

Greed is another emotion which makes investors either exit the positions too early or too late. Some of them get tempted whenever they see a small profit in their account. They quickly book the profit without even thinking whether the stock has the potential to go up much higher or not. In some other cases, people do not book profits for a long time hoping that the stock will go up much further and keep waiting. In many such cases, the profitable positions turn into a loss if the market goes down and they end up losing their profits.

7. Low transaction costs:

Investors have to pay various charges like brokerage, exchange fees, SEBI fees and STT whenever they trade. So if they end up trading very frequently these charges become huge and eat into the profits that they earn.

By investing for the long-term term you can avoid paying high transaction charges because you will be investing only once and exiting from the position many years later.

8.  Tax benefits:

Investing for the long term can give you various tax benefits which will reduce your outflow of money. You can check with your broker or chartered accountant to understand these benefits and take advantage of them.

At Finideas we help investors by building long-term portfolio strategies that are designed to yield great returns. Over the years we have helped hundreds of investors to make the most out of stock market investing. Our expert research team regularly resources for long-term investment opportunities and we help our clients to invest in the same. If you are interested in understanding more about our long-term strategies feel free to get in touch with us. Our expert advisers will be happy to help you out with investing for the long term.