Whether you’ve just began investing or have years of experience, the myriad of paths you can take can be overwhelming and confusing. There’s a sea of investments you can choose from, and almost as many different strategies.
I’ve spoken about the advantages of long term investments many times over, but here are some overlooked focal points on why they can be the solution:
The data is on your side
Morningstar found that investors lose 2.5 percent of their returns every year on average thanks to attempting to time the market through short term-decisions. And studies have found that professional investors don’t fare much better versus a long-term strategy. If you’re tempted to go with another strategy, studies like Morningstar show that you’ll most likely end up buying when the market is rising, or selling when it’s dropping. It’s almost impossible to time the markets correctly, and long term investments can be a way to avoid the need to do it.
You can pay less in taxes
Another advantage of long term investing is that you can pay far less in taxes than if you’re an active trader. After all, it’s not what you make that matters, but what you keep.
Short-term traders, or those who own their investments for a period of 365 or fewer days, pay tax at their top marginal tax rate. This could be anywhere from 10% to 39.6%. Long-term capital gains taxes are either 0%, 15%, or 20% at the highest, depending on your income. No matter how you look at it, long-term investments can save you money come tax time.
Want to learn more about long term investments and their advantages?
At LexION Capital, we offer clients institutional-level access to long term investments across the investment universe. Based on your risk tolerance and goals, we can help craft a long-term plan with these to turn your financial dreams into realities. If you’d like to learn more, don’t hesitate to reach out to us today.