What is a Long-Term Investment?

Jan 09, 2024 By Susan Kelly

They are generally classified as short-term investments and long-term investments. These investments are typically constructed for a period of from a few days or even three to five years. The short-term investment is to get more than if you keep the funds in a savings account. Also, to accomplish objectives in the short term like buying vehicles, taking a vacation, etc. Long-term investments assist investors in building wealth. Investors can have different goals in the long run for investing. The most important goals, like buying the house of your dreams, retirement in peace, education of children, and the creation of wealth, can be quickly achieved through long-term investment.

American Funds Growth Fund of America: AGTHX

As the name suggests, AGTHX mostly invests in growth stocks with a large capitalization which could comprise Amazon (AMZN) or Alphabet (GOOG). AGTHX usually holds between 5% and 10% foreign stock, which can be a positive or con, based on how a foreign stock performs contrasted against U.S. stocks. AGTHX is known to be superior to benchmarks over the long term; however, it is particularly so for periods that last 15 or longer. AGTHX will likely fluctuate within the average range; however, this is good and is typical for an index fund.

American Funds Fundamental Investors: ANCFX

The funds invest in a mix of value and growth stocks. It includes holdings such as Microsoft (MSFT) and Meta (FB), which was previously Facebook. The fund is focused on income growth and seeks opportunities that are undervalued. The performance of ANCFX varies, but it's also among the best of American Funds. Annualized returns over ten years are higher than 12 percent.

American Funds SMALLCAP World: SMCWX

SMCWX is a World Stock fund, which means it invests in U.S. stocks and foreign stocks. The fund's asset mix is divided almost equally between both. SMCWX also has its portfolio centered on small-cap stocks. This can pose more risk to the market when compared to stocks with larger capitalizations; however, long-term returns could be more favorable. This is among American Funds' most research-intensive strategies. It is based on over 100 portfolio managers as well as analysts.

American Funds EuroPacific Growth: AEPGX

This fund is among the few stocks from abroad available at American Funds. AEPGX invests primarily in large-cap companies outside of the U.S. The managers seek out opportunities in market sectors that could benefit from economic growth, demand innovation, and favorable business circumstances. Regional exposure is focused on emerging markets, Asia, and Europe. AEPGX is an illustration of funds that do not always perform in the top tier of their class; however, it has consistently provided higher than average returns, particularly in the long run.

American Funds Washington Mutual Investors Fund: AWSHX

This is a large blend like ANCFX. It's a strong long-term performance. The portfolios of AWSHX are mostly composed comprised of U.S. equities. The goal of the fund is to generate income and provide opportunities to grow the principal. Solid balance sheets and regular dividends are two criteria managers look for. This is one of the reasons why AWSHX has outperformed its index in each S&P 500 decline of 15 percent or more since it was established. AWSHX could invest as much as 10 percent of its assets into businesses outside the U.S.

Other Types of Investment Strategies

Investors can consider adding other kinds of investments to their portfolios. Certain securities that you can include might carry higher risks, but they could complement those of your index funds. Whatever other security you choose to add, ensure that they are in line with your investment objectives and conduct some research before adding them to make sure you understand the securities you're investing in.

Small-Cap Stocks

A small-cap stock is an entity with a market cap of less than $2 billion. Small-cap stocks are an investment opportunity in companies well-positioned for growth over the long term and rapid gains. Incorporating small-cap stocks into your portfolio using an index fund is an excellent method to add small-cap stocks into your investment plan. An extremely popular small-cap index fund would be the Russell 2000 index which tracks around 2,000 small-cap companies in various sectors. Of course, there's no assurance that a small business will last, and the initial performance doesn't mean it will last.

Blue Chip Stocks

The blue-chip stock is the shares of well-known, large companies that are household names, such as Disney, Amazon, and Johnson & Johnson. These stocks are considered safe and reliable and can withstand economic recessions long term. To determine blue chips, review the Dow Jones Industrial Average. Because of their proven track record, investing in blue-chip stocks can bring security and stability to your investment portfolio. If you own an S&P 500 fund or a total market index, likely, you are already exposed to these companies. Blue-chip index funds or ETFs can be a good option to invest in them.

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