Long term investment is always beneficial for retail investors who hold their assets for more than 10 Years. But on paper there is only more than 12 months consider a long term investment. LTCG (Long term capital gain tax) is applicable on long term holdings which is 12.5% and not applicable upto Rs 1.25 lakh per year (equity). STCG (Short term capital gain tax) is 20% for the asset held less than 12 months and not applicable upto Rs 1.25 lakh per year (equity).
Lets consider, S&P 500 grown 84.69% in last 5 Years. In 2020 it was around 2304.92 points and now it set the new benchmark of all time 5712.69 points. In you invest in S&P 500 in 2020 then you investment in grown by at least 80%.
If you invest $1,000 in S&P 500 in 2020 and hold till now then the value grown to $2190.47 in just 5 years.
Power of Compounding
The more you hold the asset the more you gain the returns is known as power of compounding. The main key factor of power od compounding is start early as you can because compounding effect will take a time to show.
You get a return then the return re-invest in your investment so, it give return on return and value continuously grow year by year.
Market Volatility
You know that the short term fluctuations lead to make an impulsive decision because the volatile unsettling market. This type of investments may causes to the heavy losses.
Low Transaction Cost
Long term investment result in low transaction cost and the short term investment have very high tax with brokerage and commissions.
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