The power of compounding is a beautiful concept and a long-term investment strategy is the driver behind it. You invest and let your money make money for you over a longer time frame.
However, nothing good comes on a platter.
A successful long-term investment strategy requires a bit of homework. Study your risk and goals, and research on the investment products to go a long way with long-term mutual fund investment strategy.
What is ‘Long-Term’ and Why Long-Term Investment is Good?
There is no fixed tenure to define ‘long term’. For someone in their 30s planning for their retirement, the long term could be 30 years. The definition of long-term varies based on individual goals. Most investors consider a period of 3-5 years or more as a long term.
Long-term investments help secure funds for the future. Also, one can start small and build a sizeable corpus because a long-term investment gives enough time for assets to appreciate.
Here is an example.
Let us say a mutual fund is showing a 10-year historical return of 12%.
If someone had invested Rs 10,000 in this mutual fund ten years ago, their investment would be worth Rs. 22,000 (more than double). Note that past performance is not an indicator for the future, but the math just shows why long-term investment is good.