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Home » Short-Term vs Long-Term Investing – Which is Best For Your Future

Short-Term vs Long-Term Investing – Which is Best For Your Future

In the world of investment it gets really daunting to pick and pluck investment options, when you are looking to build your investment portfolio for covering all kinds of monetary returns, be it short-term or long-term investments. 

It’s critical to know which road: the short-term vs long-term will deliver a smooth financial ride for your present and future monetary goals.

To understand that, you should be asking yourself a few questions: When are you planning to invest and in what kind of monetary schemes/funds? How do short-term vs long-term investments differ? Which is most lucrative and suitable for your investment portfolio? What are the investment avenues for short and long-term investments?

We will be uncovering all of the above aspects of short and long-term investments and more in this article. Stay with us till the end, to know it all.

Let’s pick up the basics first and understand what are short-term investments.

Short term vs long term

Short-Term Investments 

As the name suggests, short-term investments involve the generation of wealth in a short duration, typically anywhere between 3 to 5 years. These investment options belong to the low-risk category and yield good returns on investments.

When should you consider investing in short-term investments? Well, investors use them to cover their financial goals in the near future. It can be saving capital to buy a vehicle, gadgets, a vacation, education fees, or another personal requirement.

Short-term investments are ideal for you if you have a lump sum amount, that you don’t wish to touch for the next 5 years. What’s better than investing and multiplying it, right?

Let’s see some of the most common examples of short-term investments.

Types of Investment Avenues in Short-Term Investments 

There are surplus short-term investment avenues to choose from. We have covered the 10 broad sections to help you with the various types. 

  1. Bank Fixed Deposits

A traditional and trusted way of short-term investment option is fixed deposits. They are low risk, as the returns are independent of market risks. The interest earned depends on the bank and is better than many investment options. You can get loans on FDs and tax exemptions on some FDs too.

  1. Company Fixed Deposits

Company fixed deposits or corporate deposits offer a tenure of one year to invest and earn interest based on companies agreement.

  1. Sweep-in-fixed Deposits

These are an alternative to traditional FDs, offering higher returns in a period of 1 year.

  1. Bank Savings Account

Having a savings account in a trusted bank is also a way to earn interest on your capital. However, the interest is not as substantial as in another scheme. But, a savings account opens doors to various benefits like online banking, quick cash withdrawal and even online investments. 

The interest rates vary from bank to bank and it is an ideal option for people who love to keep cash lying at home. Why not put it in a bank account and reap the interest instead?

  1. Post Office Deposit Schemes

A traditional and safe way of short-term investment is post office deposit schemes. Zero risk and has a tenure of up to 5 years.

  1. Short and Ultra-short Debt funds  

Debt funds allow you to invest in various money market instruments for a period of 3 to 12 months.

  1. Gilt Funds

Gilt funds are mutual funds that invest in government securities. They are also known as G-secs or Government Securities. They are risk-free and also offer short-term investment options. However, they are subjected to changes in the government’s economic status or changes in the market. That’s why, it is advised to invest in favourable times.

  1. Treasury Bills

Treasury bills are also a type of G-sec, where you can lend your money for a short duration to buy a monetary instrument/ bill at a discounted price. At maturity, the government pay back the full value of the treasury bill, which is the return on your investment.

  1. Recurring Deposits

Recurring fixed deposits can be availed by people having a savings account in the bank. In an RD, you can deposit a fixed amount for a fixed tenure of 6 months or more. During this, you will earn compounded interest. The RD facility is offered by every bank and the returns depend on the interest rate offered by them.

  1. Large Cap Mutual Funds

Large-cap investment funds offer a lucrative way of investing your money in large companies for a short duration. Since the investment is made in large capitalization companies, the returns are stable and of low risk. The duration can be between 1 to 3 years.

That was all about the short-term investment and the various avenues to ensure good returns. But, that isn’t enough to decide which short-term vs long-term is the better investment option for you. 

To find out, let’s delve into understanding long-term investment and its types.

Long-term Investment

Any kind of investment made for a period of more than 5 years falls in the long-term investment category. This involves higher risk than short-term investments. But, also offers higher returns in the long run. 

Long-term investment options are considered to build a stable investment portfolio and in setting up solid future financial planning. However, it is crucial to acknowledge the market risk before investing. Since the majority of high-yield long-term investment options involve investing in the market, the risk shouldn’t be ignored. 

Also, long-term investments start giving good returns after a period of five years or more. So, due diligence is needed before making any kind of investment decision.

Let’s see where you can invest your hard-earned money for long-term capital gains.

Types of Investment Avenues in Long-term Investment

Long-term investment options are endless. The returns are substantial and sometimes higher than any other type of investment. The few most common streams of investing in long-term investments are stocks and equity mutual funds. Other options are Rеnеwablе Enеrgy, government saving schemes like NPS or government bonds, etc. 

Renewable energy or green energy investment option is one of the most promising long-term investments as of now. With higher returns, at comparatively lower risk than equity and shares, it has caught the traction of all big and small investors. Backed by the government, it is considered to be multifold in the coming years. You can invest in renewable energy through online investment platforms like SustVest. The investment is concentrated to provide green energy solutions to real estate projects of both commercial, social and residential domains and is growing at a fast rate.

Read more about long-term investment opinions in How to Make a Successful Long-Term Investment Decision (2023)?

Alright! Let’s get to the main point now, who is the winner for you in the short-term vs long-term investment category? Not sure? No worries, let us help you. 

Difference Between Short-Term And Long-Term Goals

The major difference in short-term vs long-term investments is the objective behind them. Let’s see which one is for you and which is not.

Short-term investments are for you if:

  • You want to create quick wealth.
  • You can’t invest for a long duration.
  • Your financial goals are sudden monetary needs like education, travel, holidays, or future investments.
  • Your risk appetite is low.
  • You are not into investing in stocks, shares or mutual funds.

Now, long-term investment is suitable for you if:

  • You are planning for retirement.
  • You are diversifying your portfolio and dividing your investments into both short and long-term investments.
  • Your risk appetite is better.
  • You have a better understanding of the knicks and knacks of the market, trading and economy.
  • You have patience and time to reap the benefits of long-term investment.
  • You have a financial backup to support you in case of a market crash down.

FAQS: Short-Term vs Long-Term Investing – Which is Best For Your Future

Why long term investing is better than short-term trading?

Short-term vs long-term investment is often debated over which is better. Long-term investing is considered more reliable than short trading as it is prone to less market risk and the returns are almost guaranteed. Short trading falls under higher-risk investments. Its unpredictable nature makes it unlikeable by several investors. 

Which investment is best long or short term?

Short-term investment is better to gain instant capital gains. While long-term investments yield higher returns and help in building asset class.

Is short-term or long-term more important?

Both short-term and long-term investments are important in building a diverse financial portfolio. To be sure of making mindful financial decisions, one should research well about the market, their financial goal, risk appetite, capital and collateral in hand. This will help in finalising which are the best short-term or long-term investment options for you.


As an investor, the first and foremost decision one has to make before investing is what are they after. Is it short-term or long-term capital gain? Both kinds of investment have their own merits and demerits. Short-term is ideal for gaining quick returns at lower risks. While long-term offers higher risk and higher return in the long run.

It’s safe to say that instead of picking one between short-term vs long-term investment; to get the most out of your investments, include both of them in your portfolio. Both have a variety of investment options to fulfil different kinds of financial objectives.

For instance, Green energy investment options open the door to long-term investment at low risk and assured returns. Check out SustVest investment platforms to create a dependable source of income for the long term.