- Posted February 13, 2023
Why You Should Hold Investments for the Long Term
Investing is a great way to build wealth over time, but it’s essential to understand the importance of holding investments for the long term. Holding your investments over time allows you to take advantage of better growth opportunities, enjoy favorable tax treatment and avoid stress due to short-term losses in the market. With an investment strategy designed for the long term, you can achieve your financial goals while reducing risk and staying on track with your plan. Our certified financial planners in Hartford, CT provide financial and estate planning services.
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Enjoy Greater Growth
Holding your investments for the long run allows you to take advantage of the steady compounding of returns, which is how your returns on investments accumulate over time. This can result in significantly higher growth than shorter-term investments. For example, if you invest $1000 at a 10% rate of return, after 1 year, you will have made $100 in returns. However, if you hold that same investment for 10 years, your total increase will be a whopping $1,107 – nearly double the initial amount invested! Time can be on your side if you invest wisely.
Get More Favorable Tax Treatment
Taxes are one of two things that no one can avoid altogether. You may not realize that holding investments for the long term can provide significant tax savings. Let's break this down: Under the current U.S. federal income tax system, the highest capital gains rate is 20%. However, depending on your income level, you may qualify to pay a lower rate of 0% up to 15%, which can be a significant amount of money saved over time. Importantly, these lower rates apply only to long-term capital gains held for more than one year. You can qualify for these favorable tax treatments by holding your investments longer. We provide investment planning services in Farmington and Hartford, CT.
Avoid Stressing Over Short-Term Losses
The stock market is constantly in flux. No matter how well you research a company or plan your investments, there is no guarantee that any investment will pay off in the short term. Even the most experienced investors have experienced losses throughout their investing careers. Taking a long-term investing approach can help protect yourself from sudden market dips. Through dollar-cost averaging and constant reinvestment, you can ensure that any gains balance out your losses – and in the long run, you may even be ahead.
When it comes to investing, remember to play the long game. It may not be a get-rich-quick scenario, but it can pay off in the long run if you're patient and smart with your investments.
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Contact Tenpath Financial Group for certified financial planning services in Hartford, CT.
