Short Term vs. Long Term Investing: Which is Better During an Economic Downturn?

Strategy is everything for investors looking to successfully navigate a recession or economic downturn. Beyond merely considering which asset classes will perform the best, it's important to decide whether you plan to enter an investment with a short or  long term mentality. Ultimately, identifying the right strategy will come down to an investor's individual goals, risk appetite, and financial means, and fortunately there are online platforms like Yieldstreet which offer a variety of alternative investments, making it easy for investors to choose a short or long term position that suits their needs.

To help determine whether a short term or long term investment is right for you, here are some of the potential benefits of each strategy in a downward trending market:

Benefits of Long-Term Investing During an Economic Downturn:

While the wild movements of the traditional stock market can scare many investors away during an economic downturn, those who are looking to build wealth over the long-term often view it as an opportunity to buy shares in their favorite companies at discount prices. Whether you're just getting started building a portfolio or have been in the market for awhile, buying in a downturn can help you position yourself for larger returns when the market shifts to the positive.

Importantly, this is not to say that every stock will be a great buy; the unfortunate truth of an economic downturn is that some companies will have a harder time recovering than others, and some may never recover at all. If you're buying an individual stock, look for value based on actual fundamentals, choosing only businesses you believe will perform well when the economy stabilizes. Alternatively, index funds like the S&P 500, which contain shares of multiple publicly traded companies, can be a solid bet, as these funds have historically produced handsome returns for those willing to ride out the storm. 

Benefits of Short-Term Investing During an Economic Downturn:

Not all assets will move in tandem to the stock market during an economic downturn, and this is why many investors look to alternative investments to take advantage of the opportunity for short-term gains. After all, no one likes to watch the value of their stock portfolio slowly drain as the economy declines, and making smart short-term investments can be an excellent way to offset losses incurred in the traditional market. 

For example, investing in short term notes can be a great way to earn returns in the form of monthly interest payments, and over a period as short as 120-180 days. With a realized net annual return of 4.6%, many investors use short term notes as a way to park their money while the fate of the traditional stock market remains uncertain. By utilizing this strategy, investors can grow the funds they hope to reinvest when the market turns around, rather than letting their capital sit idly in a bank account.

Source: Yieldstreet


Categories: Investments

Tags: Alternative Investments, Investments, Long Term Investments, Short Term Investments, Yieldstreet