There are several types of investment instruments to choose from, including short-term or long-term, depending on your financial goals, investment horizon, and risk profile.
Both short-term and long-term financial instruments serve different purposes and offer distinct return potentials and risk profiles. Understanding these differences is essential for making informed investment decisions and effectively achieving your financial goals.
This article focuses on financial instruments, their types, and their differences.
Financial instruments are legal agreements between two parties. They carry a monetary value and are a tool for wealth creation. Investing in financial instruments rather than keeping funds in a savings account allows them to appreciate over time.
Financial instruments are a great way to build wealth and achieve your long-term and short-term financial goals. These instruments offer several benefits based on the different types of financial instruments selected.
For example, fixed deposits, government bonds, guaranteed plans, etc., offer safe avenues for saving money with guaranteed returns, whereas investments in stocks, mutual funds and ULIP plans can help you build substantial wealth.
Read More to know about types of investment
| Parameter | Short-term financial instruments | Long-term financial instruments |
|---|---|---|
| Meaning | Investments with a maturity period of up to three years | Investments with a long maturity period of five years or more |
| Examples |
|
|
| Liquidity | High liquidity | Low liquidity |
| Return | Relatively lower returns due to a short investment duration | Typically higher returns due to a longer investment duration |
| Risk | Low-risk | High-risk |
| Investment horizon | Ideal for short-term goals and emergency funds | Ideal for long-term goals like education or retirement |
Investment objective
|
To meet short-term financial goals, save capital, and allocate funds temporarily | To generate income, grow capital, and hedge against inflation |
| Tax considerations | Generally subject to standard income tax rules | Can have tax benefits, like tax-free government bonds, Life insurance plans, ULIPs, Equity-Linked Savings Scheme (ELSS) funds, Public Provident Fund (PPF), etc. |
Understanding the differences between short-term and long-term financial instruments is crucial for shaping your investment strategies. It is essential to consider your financial objectives, liquidity requirements, and risk tolerance to make appropriate investment decisions. For instance, if you need access to funds within a year, short-term investment instruments are the better choice. On the other hand, if you can stay committed for the long haul, you can go for long-term investment avenues, like Century plans, saving plans, pension plans, and more.
It is wise to contact a financial consultant to select suitable products that fit your goals and needs. Moreover, leading insurance providers like PNB MetLife offer both short-term and long-term investment options designed to help you achieve your diverse financial goals.
Explore now and invest in the financial instruments that best align with your objectives.
Long-term investors should adopt the ‘buy and hold’ strategy. They must invest in assets they expect to grow over time. However, portfolio review plays a crucial role here.
Short-term investors should search for investments that can be liquidated easily or have shorter maturity dates.
You can choose between short-term and long-term instruments based on your financial objectives, risk tolerance, investor profile, and investment horizon.
Piyush Kataria, SEO Manager at PNB MetLife, is a seasoned digital marketing strategist with over a decade of experience in optimizing websites for search engines. His expertise extends to keyword research, content strategy, technical SEO, and link building, all of which have been instrumental in driving organic traffic growth at PNB MetLife. With a strong foundation in life insurance, Piyush leverages his industry knowledge to create targeted and effective SEO campaigns.
Sakshi Malhotra is a seasoned marketing professional associated with the Life Insurance industry since 2007. At PNB MetLife, she heads Digital Marketing and Direct to Customer line of business. She is responsible for driving effective customer engagement through the company’s website and social media channels. In addition, she drives customer online buying journeys to help them buy the right product.
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
PNB MetLife India Insurance Company Limited
Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka
IRDAI Registration number 117 | CIN U66010KA2001PLC028883
For more details on risk factors, please read the sales brochure and the terms and conditions of the policy, carefully before concluding the sale.
Tax benefits are as per the Income Tax Act, 1961, & are subject to amendments made thereto from time to time. Please consult your tax consultant for more details.
Goods and Services Tax (GST) shall be levied as per prevailing tax laws which are subject to change from time to time.
The marks "PNB" and "MetLife" are registered trademarks of Punjab National Bank and Metropolitan Life Insurance Company, respectively. PNB MetLife India Insurance Company Limited is a licensed user of these marks.
Call us Toll-free at 1-800-425-6969, Phone: 080-66006969, Website: www.pnbmetlife.com, Email: indiaservice@pnbmetlife.co.in or Write to us: 1st Floor, Techniplex -1, Techniplex Complex, Off Veer Savarkar Flyover, Goregaon (West), Mumbai – 400062, Maharashtra. Phone: +91-22-41790000, Fax: +91-22-41790203.
| Beware of Spurious Phone Calls and Fictitious / Fraudulent Offers! IRDAI or its officials is not involved in activities like selling insurance policies, announcing bonus or investments of premium. Public receiving such phone calls are requested to lodge a police complaint. |
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