Types of Investing

Basically there are three types of investment methods.
1. Short term investment
2. Mid term investment
3. Long term investment

Short Term Investment

Money often needs to be stored for relatively short periods of time. There are many reasons: preparing for an emergency, anticipating an upcoming expenditure, or waiting for better investment opportunities. There are many vehicles that can hold money during these intervals, each with a range of advantages related to risk, return and liquidity.

Short Term Investment is a term which defines a position in trade that lasts only for a limited period of time. These are the funds where you get the earnings in return of money that you have invested. An investment which will allow you to earn substantial money will have high rate of interest. If you want to earn or increase your money in a very short period of time these types of investments are the best. An individual trying to take advantage of the present situation in the market, this term of investment is highly preferable. You should never forget to go for a stock market consultant who would give you some share tips.

Choose The Best Ones

There are plenty of such type investments in the Indian stock market and the key to make money smartly and successfully is choosing the best one of them. It is different from retirement investing and is a challenge to find short term and high yielding investment. When you have a pressing need of money in your near future then you can go for this option. For example you might be in a need of down payment for a car or house you may opt for it. You might also use this type of fund in replacement of a traditional savings account, because you will earn a higher rate of return.

There are a number of short term investment options which people can consider for good investment. Some of them are investing in the stock market, the foreign exchange market and commodities market. Investing in these different markets can potentially give an investor some highest returns in short period of time but investing in such type of options are also considered high risk because it can also wipe out their entire investments in a very short period.

Mid Term Investment

Investments done from couple of months to couple of years is called mid tem investment.
It is done based on analysis of quarterly financial results or based on fundamental analysis.

Medium-term investing, or investments for goals between 2-5 years away, bring different challenges. Not only do you want growth but stability is now important. Since your target is fast approaching, a down year in the market will substantially affect your goals.

Imagine, there was no such thing as risk. Investing would be simple. If you were saving and  had the choice to put your money in a savings account which will earn 3% guaranteed or a bond fund earning 6% guaranteed, which investment would you choose? If there was no risk and each investment was guaranteed, the obvious choice is the bond fund.

I’m sorry to tell you that there is such a thing as risk. Your goal, as an investor, is to get the highest reward for the least amount of risk . You’re never going to eliminate risk. However, controlling risk by understanding types of risk you’re investment is subjected to is possible.

Medium term investors are subject to inflation risk. Shorter and medium term investments are subject to interest rate risk. As interest rates rise and fall, certain investments have different reactions.

Long Term Investment

Investment done from one year to couple of years like 3 years, 5 years, 10 years etc
Long term investment is basically done after thoroughly analyzing the fundamentals of the
company and its future growth prospects.

And also the wise investor invests in companies whose current share prices are undervalued
but its future growth is huge. Generally long term investor is worry free from daily markets up and down and share prices volatility.

The investor with a long- term perspective can also correct for mistakes along the way. For example, that stock you thought was going to soar like an eagle turned out to be a turkey. If you have a long-term perspective, you can change investments that aren’t working for other alternatives. However, if you will need the money from your investment in the near future (fewer than 5-7 years), a mistaken investment can create real problems in meeting your goals.

Long-term investors, especially those who invest in a diversified portfolio, can ride out down markets like the one that began in March of 2000 without dramatically affecting his or her ability to reach their goals.

However, for the investor just starting out at age 55, a market downturn can be disastrous. There is no room for error with only 10 years left before retirement at age 65. The reality of investing is that the market will go up and the market will go down. Investors that begin early and stay in the market have a much better chance of riding out the bad times and capitalizing on the periods when the market is rising. The investor with a long- term perspective can also correct for mistakes along the way. For example, that stock you thought was going to soar like an eagle turned out to be a turkey. If you have a long-term perspective, you can change investments that aren’t working for other alternatives. However, if you will need the money from your investment in the near future (fewer than 5-7 years), a mistaken investment can create real problems in meeting your goals.

Long-term investors, especially those who invest in a diversified portfolio, can ride out down markets like the one that began in March of 2000 without dramatically affecting his or her ability to reach their goals.

However, for the investor just starting out at age 55, a market downturn can be disastrous. There is no room for error with only 10 years left before retirement at age 65. The reality of investing is that the market will go up and the market will go down. Investors that begin early and stay in the market have a much better chance of riding out the bad times and capitalizing on the periods when the market is rising.