Types of Long-Term Investments

While short-term investing can be a safe way to earn a profit without taking a lot of risk, long-term investments usually offer the largest yields and are therefore the most lucrative. In general, a short term investment is classified as any type of investment lasts less than three years, while long-term investments are those that take longer than three years to provide a full return. For example, a typical short term investment would be a standard savings account or a short fixed term deposit ranging from one to three years, while types of long-term investment would be mutual funds, annuities, life insurance, stock investments, and commodities trading. Choosing a long-term investment can be a significantly challenging task because once you have chosen there is not much that you can do to change the results in some cases. In the following paragraphs we’ll review several types of long-term investments that are popular.

Annuities
Annuities are basically programs that are continuously managed by investment companies and financial institutions, in which a specific investment schedule is used to provide a stable return. There are two main types of annuities – those with variable rates and those with fixed rates. Fixed annuities offer a fixed rate of return, while variable annuities have return rates that are subject to change depending on specific economic circumstances. Annuities bear their name because they offer a fixed sum of money to the investor annually for the rest of their life, and can therefore be classified as a type of life insurance that benefits the annuity holder before their demise. In other words, you deposit a specific amount into an annuity, and each year you received a portion of that sum along with added interest to ensure that you always have an income.

Mutual Funds
Mutual funds are a type of group managed investment accounts in which a large amount of investors contribute money to a pool that is used to fund various types of investments including but not limited to stocks, bonds, treasuries, and certificates of deposits. Mutual funds are continuously managed by professional investors that select the most profitable investment instruments on an ongoing basis to ensure that the fund members receive a stable return. In a way, mutual funds are a type of savings account, as you won’t have to burden yourself with the responsibility of choosing investments; instead you would just deposit funds into the account, as you would with an ordinary savings account, and the fund manager will invest your funds and then give you a share of the profits based on how much money is stored in your mutual fund account. Investors that maintain higher account balances receive a higher respective share of the profits earned from the investment fund.

Real Estate
Real estate is by far one of the most popular and reliable types of long-term investment, as properties may decrease in value but they almost never lose all of their value, especially if they are insured. While it is possible to lose money investing in real estate, if you utilize the services of a qualified real estate agent, conduct the necessary research pertaining to current market conditions, and obtain a beneficial mortgage loan, you could reap significant returns by renovating properties and reselling them for a large profit within a span of 5 to 20 years. Individuals with good credit that are able to obtain favorable mortgages stand to benefit the most from investing in real estate, while subprime borrowers may be forced to settle for high interest rates that significantly increase the monthly cost of mortgage payments.

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