Investing can be very complicated and costly if not done right. If you are just starting with investment then its going to take a lot of research and help to get up to speed with today’s investment market.
Investing in simple terms is putting your money to work for you in order to gain profits in the future. For example, if you have a bank term deposit, or are in Kiwi Saver than you are an investor; whereby you have put your money at work and it grow in value and earn income for you in the future. The main aim of any investment is to earn an after- tax return greater than the rate of inflation.
Like any other business, investment involves some risks of loss and at the same time there are chances for you to earn a lot of profit if the investment succeeds. Usually, the higher the return you will get, the more risky that investment is. Therefore it is important for an investor to have his/her investment profile made as this will help them work out the type of investment that will be best for them. It is also good to have a mix of different types of investments to spread the risks.
Long Term Investment
Long term investments are the current liability of a company and represent the investments that a company intends to hold for more than a year. Long term investments generally mature in more than ten years of time.
They include stocks, bonds of other companies, debenture, real estate, shares and cash that has been set aside for specific purpose. The investments that you will make under long term investments, it is likely that it may never be sold.
Have lower risk than that of short term investment.
Ideal for savings or retirement funds.
Potential for high investment returns.
Long term investments are available with tax-free returns.
It is a slow investment as they increase in value slowly and take years of time to mature.
It is not a suitable type of investment for people who want high yield in a short period of time.
The investor has less control over his money until the investment matures
There are penalties or fines charged for early withdrawal before the end of agreed investment period.
There are some risks involved.
Short Term Investment
Short term investments are the current assets of a company which will mature in, or is held for 12 months or less. All short term investments mature in a short period of time and they include bank savings account, money-market funds, certificates of deposit and treasury bills. Short term investment s is safer but they pay a low rate of interest.
There are different term investment rates available in NZ. You as an investor should look for the Investment rates NZ before you invest in any investment. Interest rates of different NZ companies differ for term investment New Zealand.
They are safe because they are guaranteed by the government.
Less maturity time therefore you will get back your money in less time.
Guaranteed fixed-rate returns.
- Lower interest rate (like 3-5%)
Short term investments may lose its value after inflation.