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Seven Principles of Investment - No.4: Short term is better than long term


In the past investors have often committed to long term investments – say 5-10 years, in return for higher returns. Many savings institutions regularly offer 3 and 5-year terms as well as the shorter versions. The theoretical benefit of the longer term is that the rate will be higher, in return for you locking up your money for this extended period. That’s true – to a point.

It is also possible, as demonstrated by the Avantis Wealth portfolio of investments, to receive ‘Rewarding Returns’ (see principle no 3) on short term investments of 12-36 months.

One thing is for sure in an uncertain world – knowing what is going to happen in one or two months is hard enough, do you really think you can be confident about investment decisions five to ten years ahead?

Short term investment allows you to reassess your own position and cash needs more frequently, not to mention keeping in touch with the market and adjusting your investment strategy to benefit to the max on an ongoing basis.

I’m a great believer that short term investments, typically 12-36 months, deliver greater certainty because, assuming all other elements are equal, there is less time for anything to go off course. Because of this, short term investments are inherently less risky, which is one key element of a careful approach to risk management.


Read about all 7 principles of investment by downloading our report. The report equips you with the knowledge of how to improve your chances of success and make the most of your investment portfolio.

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