If you have any type of retirement account—whether it’s a 401(k), Roth IRA, or traditional IRA—congratulations! You’re already a long-term investor, and well on your way toward smart money management. But while many people know about long-term investing for retirement, not everyone is familiar with long-term investment strategies beyond these popular plans. 

 

In this article, we define long-term investing, share some of its benefits, and show you a simple way to get started on your own. Let’s dive in.  

 

What is long-term investing? 

 

Long-term investing, also called the buy and hold strategy, is considered a smart route for everyday retail investors. Essentially, long-term investing is when you buy an asset and hold onto it for a considerable amount of time, from a year to several decades. While industry professionals have varying definitions of “long term,” under U.S. tax code, an investment must be held for at least a year to be considered long term. 

 

Why hold an investment for so long? In the short term, the market can be incredibly volatile and hard to predict, riddled with recessions and routine downturns. People who try to time their purchases and sales according to these fluctuations stand to lose and gain a significant amount of money over a short period of time. But those who simply wait these fluctuations out over many years give their investments time to rebound—and tend to benefit from the long-term growth of the market. 

 

Assets that are volatile in the short term—like stocks, mutual funds, and exchange traded funds (ETFs)—tend to perform better over the long term, making them popular choices for long-term investors. That said, long-term investments can also include real estate holdings, long-term bonds, and annuities. Long-term investing is often used to meet specific savings goals, like preparing for retirement, college tuition, or purchasing a house.

 

What are the benefits of long-term investing? 

 

Long-term investing is a relatively accessible strategy that’s had historic, repeated success. While all types of investing have inherent risk, long-term investing comes with numerous benefits over short-term investing. These include: 

 

    • Less active management: Long-term investing tends to require less active management than short-term trading. Rather than trying to time the market, long-term investors can simply ride out market fluctuations, requiring significantly less upkeep. 
    • Lower taxes: Profits made from long-term investments are known as long-term capital gains, and are taxed at either 0, 15, or 20%, depending on the investor’s tax bracket. Short-term capital gains, on the other hand, are taxed as ordinary income, which tends to result in higher taxes. 
    • Less risk: Being a successful short-term investor requires timing the market almost perfectly. Inexperienced investors are often better off with dollar cost averaging—or making regular investments over long periods of time, regardless of the price of the asset, to offset fluctuations. 
    • Less stress: Along with being exceedingly difficult, timing the market can cause investors a lot of stress. If you have a low tolerance for risk, market fluctuations can lead you toward unwise decisions. On the other hand, sticking to a long-term investment plan can help you stay calm with the knowledge that your portfolio will likely bounce back in time. 
    • Lower cost of entry: Long-term investing allows you to invest small amounts of money over long periods of time while still seeing potentially significant results. Short-term trading, on the other hand, requires large sums of money in order to see big returns, posing a big barrier to entry for most people. 

 

At the end of the day, the lower risks that come with long-term investing make it a smart strategy for those without the time or knowledge needed to time the market. Investing modest sums repeatedly over a long period of time can ultimately reduce the market’s volatility and lead to more likely returns. 

 

How can I get started? 

 

If you already have a retirement account and are looking for other ways to start investing toward your long-term goals, you can open a taxable brokerage account. Once you open an account and choose assets with high growth potential, you’ll need as much data as possible to help you maintain an informed strategy. That’s where the JAVLIN Invest mobile app comes in. 

 

With JAVLIN Invest, you gain access to key metrics about your portfolio, along with information on potential risks and opportunities, so you can make informed decisions about your long-term holdings. Discover how the app works—and start making more knowledgeable investment decisions today.