Time plays an very important role in case of mutual fund investment. In short run your investment can provide you good returns but there are chances that you may suffer a huge loss also. This is because in short run the level of volatility is quiet high which can provide you good amount of profit as well as huge loss.
Market acts quiet differently when we compare short term invest along with long term investments. In short run market are volatile while in long run market is quiet stable. As Sir Warren Buffet once told, “Invest for long term”, such investment ensures far more better return when compared to short term investment.
Benefits of Long term investment:
1) In short term investment an investor may not get the benefit of averaging, but in long term investment an investor get the opportunity to average his cost of investment as the investor can invest this resources at different point of time.
2) Short term performance of any mutual fund scheme is unclear however we can predict the long term performance of the funds by the help of historical price chats and accordingly we can choose the best fund which have the potential to provide better returns in future.
3) Accumulation of wealth, Retirement planning, Less risk exposure, Tax Benefit are the some of the primary reason why one should prefer long term invest rather than short term investment.
The longer you stay invested, lower is the risk of losing funds. Long-term investments ensure consistency against speculative gains. Successful investors base their actions on deep research rather than random market ups and downs.