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Long & Short Term Investments Simplified! Read and Choose Best for Yourself.

The term investment has become muddled as a result of its misuse in the financial industry during the last few decades. Investments play a significant role in your general financial well-being and the accumulation of a savings account for the future. Mutual funds, equities, bonds, real estate, and other types of investments are common.

People nowadays are well aware of the value and relevance of investing plans in achieving financial stability. However, many of them are perplexed when it comes to deciding on the best form of investment plan in the UAE. Investment plans are classified based on a variety of characteristics, including the investment purpose, time horizon, returns on investment, and degree of risk connected with the investment.

Thus in today’s blog, Dhanguard will answer all of your questions regarding the feasibility and profitability of Long Term and Short Term Investment Plans. So without any further ado, let’s learn!

To Begin with, What are Investment Plans?

Simply said, investment is the process of putting money into a scheme or plan with the goal of generating and increasing wealth in the form of returns. Returns are the benefits acquired from investment strategies in the financial sector, and they can be positive or negative.

When it comes to understanding investments and investing strategies, it's crucial to remember that rewards and risks go hand in hand. The greater the rate of return, the greater the degree of risk. Investors, contrary to the ideal scenario, typically seek out programmes with minimal levels of risk and high rates of return.

To guarantee that novice investors do not lose money, it is normally recommended that they start with investment plans that have minimal risks and modest returns.

What are the Various Types of Investment Plans?

As previously said, investment plans are classified according to a variety of characteristics. In this thread, we'll focus on the classification of investment strategies based on their time horizon.

Plans can be divided into two groups based on the investment's timescale:

Short Term Investment Plans

Short-term investment plans, on the other hand, are classified as highly liquid, short-term investment vehicles that are typically converted into cash within five years. Short-term investment plans allow investors to lodge excess funds for shorter periods of time, giving them a sense of security.

Long Term Investment Plans

When compared to traditional investing tools, long-term investments are described as investment strategies that allow investors to lodge their surplus capital for comparatively extended periods of time. Long-term investment plans are often those that are carried out over a period of more than five years and are favored by those who want to build wealth over time.

Difference between Short Term and Long Term Investment Plans

Short Term Investment Plans

A short term investment plan is any type of investment that allows investors to park their money for a period of less than five years. 

What are their benefits-

  • Because they frequently come with high levels of liquidity, short term investing tools are suitable for accomplishing short term goals. 

  • Short-term investment plans are appropriate for investors who want to put their extra cash in a safe place with the goal of expanding it over time.

Below mentioned are types of Short Term Investment Plans which you can consider for yourself-

Systematic Investment Plans

SIPs are one of the most organized and structured types of investments available, and are ideal for investors who want to invest on a regular basis while minimizing risk and maximizing rewards.

Gold

Due to its unique properties, gold falls into both groups and is thus ideal for a wide range of investors.

Mutual Funds

A mutual fund is a form of investment vehicle that pools money from a number of individuals to invest in securities such as stocks, bonds, money market instruments, and other assets. Professional money managers manage mutual funds, allocating the assets and attempting to generate financial gains or income for the fund's investors. The portfolio of a mutual fund is built and managed to meet the investment objectives stated in its prospectus.

Liquid Funds

A liquid fund is a useful financial tool for investing or storing money for a short period of time, such as a few weeks or months. Liquid funds, like any other mutual fund investment, offer no assurance of return or principal. However, the structure of these funds makes them a good option for investing money even for short periods of time, as opposed to storing money in a fixed-term financial instrument that pays interest.

Savings Account

A savings account is a deposit account that pays interest and is held with a bank or other financial institution. Despite the fact that these accounts often yield a low interest rate, their safety and stability make them an excellent choice for storing cash for short-term requirements.

Read More: Let’s know about Top Mutual Funds in UAE

Long Term Investment Plans

Long-term investment plans, as previously stated, are built and developed in such a way that they allow investors to invest their money for the long term. The best way to invest in long-term investment plans is to pick the right type of plan and then wait patiently for the plan to pay off in the form of positive returns.

What are their benefits-

  • Rewards for Loyalty

  • Life Insurance

  • Accumulation of Wealth

  • Flexibility

  • Financial Planning with a Purpose

Below mentioned are types of Long Term Investment Plans which you can consider for yourself-

ELSS (Equity Linked Saving Scheme)

ELSS, also known as equity-linked saving plans or equity funds, are ideal for investors with a moderate risk tolerance and strong long-term return expectations.

Gold

One of the earliest investment instruments. Because of its high liquidity, it is appropriate for both long and short-term investors.

Real Estate

One of the most popular long-term investment options in the United Arab Emirates. Ideal for those with a large initial investment.

Unit Linked Insurance Plan

A Unit Linked Insurance Plan (ULIP) is a unique investment vehicle that also provides life insurance cover. ULIPs enable you to build money for long term goals such as your dream house, your child's education, your retirement, and more through systematic investments and market-linked returns.

Bonds

One of the most popular investment vehicles. Bonds are great for investors with a low risk tolerance capability.

Which Should You Choose: Short-Term Investing or Long-Term Investing?

There is no apparent winner because each has its own set of advantages and disadvantages. Short-term investing allows you to reach your financial objectives in a short period of time while minimizing risk. Long-term investment routes, on the other hand, can be chosen if you have a bigger risk appetite and desire better returns.

Short-term investments are a good choice if you want to keep your money safe and earn reasonable returns. If you want to make more money, though, you should look at long-term investing options.

Conclusion

Both long and short-term investment strategies have advantages and disadvantages. When deciding on a type of investment, one should consider their objectives and expected returns, as well as conducting thorough research to arrive at a meaningful conclusion.

Thus we hope this blog provided you with insightful information. For more information on other related aspects, feel free to check out our website as well or get in touch with our Experts by visiting our Branch Office.

Frequently Asked Questions

Earning money now is insufficient, since it may not be enough to meet life's financial objectives. As a result, it is critical to spend money. Saving money in the bank is the same as giving up an opportunity to make money. It is crucial to invest carefully in the different plans available on the market, choosing the one that is ideally tailored to your objectives.

With new technologies and goods, the investment market is rising by the day. The conditions for investing in different forms of investment instruments differ depending on the providers in the UAE.

Expats can invest in stocks, bonds, real estate, cash, UAE mutual funds, or other forms of funds in the UAE.

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