Many of the world’s wealthiest individuals achieved their status in part through investing. There are numerous ways to invest, including thousands of securities in the U.S. stock market to choose from. You also have to decide if you want to invest choice short- or long-term. Here are four reasons why it’s beneficial to choose the long-term. 

4 Benefits of Long-Term Investing 

1. Tax-Friendly 

Capital gains tax rules dictate that short-term profits, or gains made within 365 days or less, are taxed at a significantly higher rate than long-term holdings. Typically, if you sell a stock within one year, you’ll pay a tax rate equal to your income tax, depending on what bracket you are in. With long-term holdings, the tax rate is typically 15% for people in the 25%, 28%, 33%, and 35% income-tax brackets and 0% for those in the 10% or 15% tax brackets. 

2. Less Emotional 

Short-term trading is mostly based on speculation and requires a significant amount of time and effort to track and analyze the market regularly. It’s also prone to behavioral bias. This bias may cause you to give too much merit to recent events and use this data as a means to predict the future, even if this method is not necessarily accurate.

When you invest long-term, you’ll be more likely to look at the bigger picture. There is less emotion involved as you are not constantly buying and selling, and you’ll be less likely to make rash decisions. 

3. Cost-Effective 

Each time you buy and sell a stock, you pay expenses such as stockbroker commission and security transaction tax (STT). With short-term trading, these costs can quickly add up and take a chunk out of your profit. With long-term trading, on the other hand, you’ll pay these expenses less frequently, thus keeping more money in your pocket. 

4. Better Payoffs 

Research indicates long-term investments tend to outperform their short-term counterparts by a significant margin. Stock valuations have historically increased by 7% annually. Also, companies that perform well financially may distribute a part of their net profit to shareholders. This payout is known as a dividend, which is tax-free and can be reinvested. With long-term investing, you’ll also likely work with a financial advisor who can assist you in making informed, wise choices that will produce a better return on your investment. 

If you’re a Lake County, OH, resident in need of investing guidance, turn to Headwaters Investment Counsel LLC. Located in Kirtland, this investment firm has served the community since 2009. President Latham “Skip” Murfey III has over 40 years of industry experience and leads his team in helping individuals and businesses with a range of financial needs including money management and investment strategy. Call (440) 399-3359 to speak with a helpful team member to schedule a consultation. Or visit the website to learn more about their services.