In what may be a sign of increasing confidence in the economy, a majority of investors would opt for long-term over short-term investments, according to a recent survey by the Spectrem Group.
Using a scale of 0-100, where short term investments are equal to 0 and long-term investments are equal to 100, surveyed investors with a net worth of $500,000 and more of investible assets had a score of 66.85. The results were uniform across wealth levels, gender, retirement status and occupation.
“Despite the recent recession and the many investors that have retreated to the sidelines, overall we’re seeing investors who are more long-term than short-term in nature,” said Tom Wynn, Director of Affluent Research for the Spectrem Group
There are practical advantages to long-term investments, which are held for more than one year. For example, long-term capital gains are taxed at discounted rates depending on your tax bracket.
But generally, short-term investors may be expressing a wariness about the economy and adopting a strategy of waiting for things to improve. Long-term investors are apt to be younger and still working, with the time to build up their investments. Of those surveyed by the Spectrem Group, those who identified themselves as still working or semi-retired had a score of 67.31. Those participating in a retirement plan are also more likely to invest in long-term investments than those who are not (with a score of 68.80 versus almost 61.69, respectively).
While short-term investments do have the potential for fast growth, they can also be riskier than long-term investments, which, with a diversified portfolio would be better able to withstand fluctuations in the market and allow the investor to recoup losses.