Shares/Stock Does long-term Investments Carry Lower Risk?

[raaman]

Do long-term investments carry lower risk?

When you intend to make investments in mutual funds, it requires a suitable time frame to invest. It is because a proper time frame of investing money not only gives you a better chance of getting the expected returns on your investment, but also reduces the risk involved in the investment.

What is the so called ‘risk’ involved in the investment? In simple layman’s language, the risk involved in the invested amount can be defined as fluctuations that is the rise and fall in the performance of the amount of investment made and also the chances of depreciation of the invested amount of money.

When you make an investment for the long term, low, or negative returns in a few years and good returns in some other years combine to give you a reasonable amount of average returns. Therefore, it is better to average the returns that vary from one year to another year.

In this way, you, as an investor, can get a good stable long-term return. For each asset class and mutual fund type, the recommended duration of period may vary. So, before rushing to invest any amount, it is better to consult an investment advisor, and read the relevant scheme documents.​

 

[Suba]

In general, movements/fluctuations in short-term investments are very fast, or price volatility will create a greater risk, whereas in long-term investments, on average, market price movements are slower so that long-term investment risks are considered smaller.

However, one of the risks of long-term investment is that if the central bank's interest rate rises, it will be inversely proportional to bond investment instruments whose value will decrease.

However, if short-term investments in mutual funds and funds managed by investment managers will be invested in investment instruments that are easy to trade, then many investors consider short-term risks to be lower than long-term investments.