by Carolina Maia 9th September 2021
Short-term vs. Long-term investors: We answer 3 fundamental questions

Our Chamber Corporate member Antonio Rosa from Blacktower Financial Management Group in Portugal answers some typical questions from those thinking of moving their financial and day to day lives to Portugal.


 

What is meant by Short-Term Investors vs Long-Term Investors?

Short-term investors are those who invest in financial instruments intended to be held in an investment portfolio for less than one fiscal year. In many cases such investments may be held for only a few weeks, and in the case of traders, perhaps even only a few hours. Conversely, long-term investors represent people investing in long-term financial instruments that they hold for more than 5-8 years. However, the definition can change depending on who you ask. Some financial institutions define long-term as anything over 1 year, but the investment window of 1-5 years is often seen as a medium-term investment.

Which is better: Short-term or long- term investments?

Your financial goals will drive whether short or long-term investments are better for you. The same asset can be a short or a long-term investment depending on the investor’s approach – shares held by a day trader would be classed as a short-term investment whereas those held within a pension fund would be a long-term investment.

The differences between short and long-term investments

Risk profile
Short-term investors tend to favour higher risk/reward investments such as shares. Some shares can be quite volatile, such as those in tech or cryptocurrency. These can give the potential for quick gains, but of course, the value of shares can go down as well as up.

Passive vs. active
Short-term investors are usually more active when managing their portfolio since they are making changes on a more frequent basis to outperform the market. Long-term investors typically take a more passive approach to asset management.

Volatility
Short term investors tend to be open to more volatile assets than long-term investors because short-term traders generally rely on stock volatility to realize a profit.

Investment goals
Investors who have immediate goals will tend to opt for short-term investments. If you are a trader that relies on the investment to pay your living expenses, then your goal will be to make income within the next week or month. Other short-term investors who might be looking to create a fund for a purchase such as a car or holiday, will generally be looking to make short-term investments. Those looking to provide retirement income will opt for longer-term options.

What are my options for long-term investments?

Long-term investments include those assets that are less liquid than stocks such as real estate and bonds, but stocks that are held over several years also make great long-term investments. These investments provide opportunity for significant growth and can withstand fluctuations or downturns in the market. Investors who are looking to diversify can choose a multi-asset fund, spreading the risk across multiple asset classes. This protects your capital investment in the event of a fall in one or more specific sectors.

Nexus Global Solutions and Nexus Global Dynamic Portfolios

The Nexus Global Solutions Portfolio is an actively managed, globally diversified, multi-asset class fund. There is a dual focus on capital protection and capital growth over the medium to long-term investment horizon. This fund predominantly invests in developed equities markets (c.45%) but spreads risk across a wide range of geography and sector as well as other asset classes including gilts, bonds, commodities, property and cash.

The Nexus Global Dynamic fund is an all-equity, globally diversified fund with an emphasis on capital appreciation over the medium to long-term. It uses a dynamic asset allocation approach which constantly adjusts the mix of equities as markets rise and fall and has exposure to major developed economies and selectively to growing economies.

Both portfolios are great options for long- term investment. They are optimised for capital growth over a 5+ year investment timeframe and compound growth over the long-term is an excellent driver of return on investment.

Advice from Blacktower Financial Management

Understanding your investment options requires significant research. Blacktower Financial Management has long-standing expertise to ensure you optimise your portfolio to meet your investment goals. Contact one of the representatives at our Lisbon office today for your free no- obligation discussion.

Blacktower in Portugal

Blacktower’s offices in Portugal can help you manage your wealth to your best advantage. For more information contact your local office.

Antonio Rosa is the Associate Director of Blacktower in Lisbon, Portugal.