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Automatically, we associated the term “investments” with planting a seed and watching it become an enormous tree in 10-15 years. You’re not wrong thinking about it this way — long-term investments do resemble trees. They branch out and evolve to tremendous value if their environment meets certain conditions.
If you’re planning to start on long-term investments, we’ve got you covered. Below, we’ll share with you great examples of long-term investments capable of growing to sustainable and beneficial heights.
But, first things first…
Investors classify these into two: regular dividend stocks and high-yield/growth stocks. Stockbrokers present regular stocks as upcoming or established companies and their growth prospects in the next 3-5 years.
Truthfully, most stockbrokers and exchanges advertise certain growth stocks in a certain way because investors need to invest higher due to the exceptional value these have.
When you hear people say “investments,” you think of dividend stocks and shares. During high manufacturing and gross domestic product (GDP) seasons, locking on both regular and high-yield investments will give you huge returns.
However, when economic recessions hit, stocks lose the most value than diversified funds (mutual, ETF, and others), unless you find or invest in a “unicorn” company like Facebook, Amazon, and other equivalents.
If you’re willing to stick it through thick and thin with your diversified portfolio of regular and growth stocks, you’re sure to get huge returns when higher FTSE Straits Times Index (Singapore’s S&P500) performance happens. Truthfully, it’s easy to own high-performing stock if you’re looking for long-term investments that yield great profits.
During a bearish market (meaning a poorly-performing commercial and industrial market), interbank borrowing rates, such as SIBOR, have increased interest rates due to increased risks. Long-term bonds have a powerful shield because it does not use bank rates as their value anchor.
Instead, it increases its price thanks to its limited supply. You can think of it as an alternative to gold. When stock prices decrease, bond prices stay the same, but the treasury’s bonds can deplete.
A direct inverse to stocks, bonds allow investors to float during the most terrible financial recessions. However, if the commercial and private sectors have flourishing profits and low-interest rates, bonds become virtually useless — until a recession happens again.
However, bonds are decades long-investments, the lowest being 30 years. Additionally, bonds change interest rates as fast as a single year. Therefore, your 30-year 3% yield treasury bond will sell low because it is a fixed-rate bond, even if the current year endorses a 5% yield on the bonds.
Stability is one cornerstone low-risk investors love about bonds. Their predictability allows them to invest more money with safe and calculable yields. Furthermore, if you invested in bonds the previous year and saw a recession the following year, you can get high returns once bonds deplete, and investors are clamoring to purchase them at higher than ever prices.
When you combine a set of stocks and bonds to achieve a certain goal, they become a fund. Mutual funds are managed by professionals who create a company (complete with incorporation) to help first-time and long-time investors make long-term investments with different profit possibilities.
You’ll only allocate a certain amount of capital, then the professional brokers and managers will make the investments.
Mutual funds present their fund manager’s strategy and objectives. Working with actuaries, managers can present optimistic, average, and pessimistic returns their investment strategies can achieve.
- Mutual funds describe themselves as the following:
- Equity: Stock-oriented with high risk
- Fixed-Income: low but guaranteed stable income, medium risk
- Index: high-yield stock oriented. Expensive but medium risk
- Balanced: Risk-reduction focused. Very low risk but low return
- ETFs (More on this below)
Like other investment products in this list, your rewards depend on the risks you’re willing to take. Most beginner mutual fund investors go for balanced funds but find its slow, and low profit returns troublesome. Some want equities for impressive returns, even if it’s just once or twice in a blue moon.
For long-term investments, balanced funds are your best bets. Choose stability and low risk over quick and high profits accompanied by high risks.
ETFs have an extremely popular mutual fund, an investment trust structure, allowing them to trade on the stock and receive stock benefits. Therefore, it enjoys stock liquidity, making it another option for short-term investors.
Their lower fee makes them a much more appealing choice. Plus, ETF managers can hedge or leverage funds for maximum profits.
While most financial advisors rate ETFs as a low-risk investment, stock tax variety will apply to its liquidity. Truthfully, tax-efficiency is notable in ETFs if managers buy and sell them in-kind. Capital gains taxes occur when derivatives, commodities, and other factors get involved.
Like stocks, ETFs increase their value if the market is bullish (or positive). When GDP plus commercial and industrial activities increase, so will ETF values regardless of style. However, if your ETF does not trade in bonds, you might be in trouble once recession hits.
From the Middle Ages to modern times, real estate is a commodity that only grows in value. Truthfully, it’s one of the most expensive investments you can make with a 20% down payment as the minimum ownership fee of properties you intend to rent out to Singaporeans or foreigners.
The average cost of non-HDB properties in Singapore is beyond S $200,000 – S $ 400,000 at a minimum. However, because of the high demand for real estate in the country, it remains an excellent source of income despite its slow start.
One risk exists with real estate investments: bank debt and passive management. You can assume bank debt as money you’ll invest in the property coming from a reputable financial institution. Truthfully, this works similarly for owner-occupant properties.
Once you’re running multiple rental real estates, you’ll want to use a management company to oversee maintenance, accounting, and other necessary procedures to enhance your investments’ quality and dependability.
Both of these entail great risks because you can end up with deep bank debt if you fail to pay or secure a tenant (if your interest to invest in real estate is rental profit). Plus, your passive real estate management company can demand you to pay their accumulated fees if you default on property payments.
Real estate’s value remains high, thanks to the consistent demand and limited supply. If you can ride out the initial massively-expensive storm, you can expect to find an enormous profit. This outcome is true, especially if you’ve completed property and debt payment and going beyond your break-even rates.
Honestly, you haven’t heard a single Singaporean soul tell you they’ve achieved financial independence by using tax-sheltered retirement plans. However, many financially-successful individuals use them to minimize their investment losses. Everybody pays taxes, but if you have tax shelters, you use legal means to minimize your contributions and get more profit from your assets.
Tax shelters use existing tax brackets for investment profits regardless of capital assets. Thankfully in Singapore, you won’t need to worry — the government does not charge for any capital gains taxes. Alternatively, you can lower your taxes by familiarizing yourself with the country’s bilateral tax treaties.
With no capital gains tax to worry about, Singaporeans can maximize the sale, purchase, property transfer, and other profits they receive by moving assets. Truthfully, tax shelters are zero-risk ventures, but then again, they’re not actual investment vehicles. On the other hand, they can be tedious with all the legwork and paperwork.
Being familiar with Singapore’s tax system enables you to maximize profit within every legal limitation possible. Therefore, you won’t need to worry about long-term issues arising from investment profits you’ve failed to track. While the absence of any capital gains tax helps, you might step on a legal landmine if you’re not too familiar with Singapore tax laws.
Automation is one of the biggest benefits this age of progressive and advanced technology benefits any Singaporean, including investors. A Robo-advisor is like a fund manager in your pocket with the option to customize their management and purchasing style. For example, you can set your Robo-advisor to invest in stocks and minorly in bonds.
It uses machine learning, another advancement for both technologies. Once it learns you and other investors’ practices, it can give you asset recommendations using success percentages from other Robo-advisers as the basis.
Most Robo-advisors have some basic parameters to set during the start, allowing you to adjust them progressively to suit your automated investing style.
Truthfully, the 0.25% commission it receives is negligible. However, you face similar risks if you will invest in stocks or bonds independently. When using your Robo-advisors, research and decision-making bulks will always be yours; they can only provide suggestions.
As for your bot, its responsibility is to assess whether it meets your pre-set investment goals. It will then give you recommendations using its talents of fast-tracked data comparison analysis between investors who have the same investing behavior and assets as you.
Like risks, the rewards you get from Robo-advisors are thanks to your assets’ performance. However, it’s easier to assess rewards thanks to a data-accurate Robo-advisor.
It can provide you details on trends and actions by other investors. Having an effective briefing regarding the general investor flow helps you anticipate whether certain asset prices can increase or decrease.
These are insurance products that invest for you. These products have their respective objectives, such as providing you with income at 65 until your death.
To make their products accessible, insurance companies make annuities affordable for entry-level products at least. However, substantial-paying life-plans ask you for a higher initial down payment before subsequent installations until you finish paying.
Some financial advisers consider annuities a controversial product because it benefits the insurance company and its representatives more than the beneficiary.
For example, if you paid to get an income after you retire by 65, you maximize your annuities if you lived up to 100 years. Achieving this meant the insurance company paid the additional percentage they advertised.
Otherwise, you will have fared better saving your huge initial annuity down payment and subsequent installation payments to pay yourself after retirement.
Annuities are useful if you are in good shape. Unfortunately, no human can ever predict their final resting years’ duration. However, having peace of mind that a financial institution is liable to keep you financially afloat during retirement can benefit the majority of Singaporeans.
As we’ve mentioned above, if you live for 65-100 years, you have maximized your investments to the fullest. On the other hand, passing away earlier than 75 will reward the insurance company the retirement fund remainder. Some annuities award your remaining fund amount to family members or registered beneficiaries, but these are rare.
1. Higher Risk Levels Equal Higher Returns (And Vice-Versa)
Don’t be swayed or fooled by seminars and advertisements brokers publicize about investing being worry-free and easy. Making investments is easy, thanks to technology and financial technology advancements. However, turning a profit through long-term investments will always be challenging. To make your long-term investments bear fruit, you’ll need to research and have a complete understanding of SWOT.
Every business relies on its strengths, weaknesses, opportunities, and threats (SWOT) analysis. Thankfully, many business and market analysts have their respective SWOT analytics data on different websites and magazines. All you’ll need to do is a simple search engine query.
2. Time Horizon Anchored To Your Goals
Truthfully, long-term investments have smaller risks than their short-term counterparts because assets can recover their value over time. For example, during a recession, short-term investors suffer more losses if they invested in stocks. However, best long-term investments with in-depth planning can ride out the ups and downs of its stocks through a recession and gain double or triple the initial investment value.
However, a long-term investment fund is never risk-free. You might be at the end of your holding position, and without warning, interest rates have plunged so low, spelling bad news for your bond-oriented investment approach. After decades, you’ve received only a small investment growth instead.
One of the best ways to build wealth over time is to invest long-term. If you’re looking to get started with long-term investing, it’s critical to always invest with the right information on hand. With the right thoughts on the best long-term investment products, your user experience during investing becomes smoother and profitable. Subscribe to Investoralist for more investment tips and ideas!