How to Invest for the Long Term

Investing is one of the best and most important ways you can save money for the future. When you invest for the long term, you are giving your money the time it needs to work for you behind the scenes until you're ready to start cashing in on your accomplishments. Many financial experts also believe long-term investing is a much safer way to increase your gains than short-term investing.

Difficulty: Moderate

Instructions

Things You'll Need:

• Investment opportunities
• Start-up capital
• Broker or financial advisor

Invest for the Long Term

1. Invest in bonds. Bonds are largely considered one of the safest forms of investment, and they take 20 years or more to mature. The interest rates for bonds are much lower than what you would get from mutual funds or stable stocks, but you can still make solid gains on your investments with them.

2. Choose mutual funds with a higher yield. High-yield mutual funds often perform better in the long term, with rates of return commonly above 10 percent.

3. Invest in stocks from stable companies that show continual growth from year to year. Many of the world's larger companies, like AT&T, Microsoft and Texaco, have continually displayed a dependable rate of return from year to year, even if there are times when the stocks suffer setbacks.

4. Invest in an IRA. IRAs (individual retirement accounts) have terrific tax incentives and enable owners to invest in their futures at an early age. There are often penalties for withdrawing on an IRA prior to maturation, but each type of IRA has different restrictions.

5. Save your money in a savings account with a high interest rate. Some banks offer savings accounts with interest rates of over 4 percent, making it possible to safely earn interest on your investment without losing money.

Tips & Warnings

• Leave your money alone. It's very important when you invest for the long term that you not micromanage your investments from day to day or even month to month. Markets and investment values will fluctuate up and down, and unless you've made unsound investments, your chances of seeing profits are fairly good with long-term investments.
• Understand that even though long-term investing is far safer financially than short-term investing, there is still the chance that you will lose money. The risks are much lower, especially when you choose less-volatile mutual funds or investment opportunities, but they are still there.

Resources

• Investment tips from Investopedia.com