Short-term vs Long-term Investments

Hola bellas!  Have you ever had to make a decision that would help you in the short-term but would set you back in the long-term, or vise-versa? For example, you decided to start working multiple jobs to make some fast cash (short-term), while putting off a college education. Sure, you’ll make money, but you’ll limit how much you can earn down the line.  Versus going to college and working towards a career (long-term) that will pay off at least 10x more than what you would have earned by not going to college.  These are similar decisions that you have to make when investing your money short-term versus long-term.

• Short-term investments are any investment that you keep for three years or less. An example of a short-term investment would be day trading stocks, hoping to make a large profit quickly, but it’s very risky to do that because you might lose some of the money you invested.  Another downside to short-term investments is that they’re taxed as if they were part of your ordinary income, which is a lot higher than long-term capital gains are taxed.

• Long-term investments are those that you expect to keep for many years. Long-term investments usually have a higher chance of maximizing your return over ten years.  When you purchase long-term investments, it is recommended that you don’t check your investment’s performance too often, because you might be tempted to sell if you notice that there was a massive drop in the market. You don’t want to sell when the price goes down and lose money.  It’s better to hold onto the investment and wait for the value to go up long-term.

Historically, the market has always gone up over the years.  A benefit of long-term capital gains is that you’re taxed at a lower rate than short-term capital gains.  The most awesome part about this is that if you’re still young, single, and earning less than $39,375, your long-term capital gains tax will be 0%!!!  You should take advantage of this and start investing.

If you’re lista (ready) to start investing, make sure to diversify your investments so that you don’t place all your eggs in one basket!

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