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What are Long-Term Investments?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 17 April 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Long-term investments are any investments that are intended to be held for a period of more than one year. This is in contrast to short-term investments, which are held for less than one year. Investments of this type are often secured for reasons such as planning for retirement, or to generate a steady flow of income from stock dividends from one year to the next. While these assets are usually acquired with the idea of hanging on to them for a long period of time, there is still the possibility of selling them should the need arise.

Many different types of assets can serve as long-term investments. One of the most common is real estate. Many people purchase property with the plan of owing it for many years, then selling the real estate as a means of creating a source of cash for the retirement years. The idea is that over time, the value of the real estate will increase, allowing the owner to eventually realize a significant return from when the property is sold. In the interim, the owner may use the property as a permanent residence, or lease the property to others, effectively creating an income stream for immediate use.

Cash that is kept in an interest bearing account can also be thought of as a long-term investment. Balances of cash that maintained in a standard savings account, or committed to Certificates of Deposit that are allowed to roll over at each maturity date, represent a type of investment that even people who are not in a position to acquire other long-term investments can initiate at any time. Best of all, the balances of savings accounts can be added to incrementally, a factor that is very different from some other forms of long-term investments.

Another example of assets that may serve as long-term investments is stock. Shares can be purchased and held for many years, if desired. Ideally, the value of those shares continue to increase over time, allowing the holder to receive dividend payments that in turn can be used to purchase more shares of stock. By choosing stocks wisely, investors can create a very stable portfolio that is grounded with shares of stock appreciate in value from year to year, providing a solid nest egg.

Even bonds may serve as long-term investments. While there are bond issues that are structured to mature in less than one twelve-month period, many are configured to require anywhere from two to twenty years before maturity is reached. While the return from bond issues is usually not as significant as with stock holdings, bonds do represent a relatively low-risk form of investment that is highly likely to yield the anticipated return over the years.

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