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Long-Term Investment Strategy

Long-term investments are among the most lucrative on the global market – but they have some significant downsides as well, such as low liquidity and long time horizons until your investment pays out. Let's have a look at how long-term strategies work and why CARL's quants may be a better investment option for those looking for significant gains with less long-term commitment.

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Investment Strategies With Long Time Horizons

As the name suggests, long-term investments require you to hold on to an asset for a very long time. While there is no generally accepted definition of what constitutes "a long time", you can assume that holding onto something for a year or more qualifies. Some investors even specialize in so-called buy-and-hold strategies where you're required to hold onto an asset for decades at a time.

Such long-term investors usually cite the potential for great returns and limited exposure to risk as benefits of this strategy. The limited risk comes from the fact that investments you hold for years or decades aren't affected as much by volatility – if the price of your shares in a company drop for a few months, you can simply ride it out until the company's value goes up again. This makes long-term strategies a decent investment option for people with a low risk tolerance, the discipline needed to wait for the investment to pan out and enough financial security so that they won't need their money back anytime soon. Or, to put it another way: this investment strategy has good potential for returns, but it suffers from a few cons that you should weigh against the pros:

  • The gains may be significant, but you need the discipline to stay with your assets through hell and high water.
  • Worse yet, if you put your money in the wrong asset from the start, it might take many years only to realize that nothing will come out of that investment.
  • Since long-term investing relies on getting significant returns in the long run by keeping your money invested, you're not going to be able to withdraw your money in an emergency without ruining the entire investment. In the case of some investments, such as private equity, you might not even be allowed to withdraw your money for at least an initial period of a couple of years, depending on the fund's rules.

In short: As much as proponents of long-term strategies like to point out their benefits, they might not be the perfect investment option for anyone looking to make significant returns in a more modest time frame. For example, if you're looking to enhance your retirement savings 10 years before you're set to retire, it's usually better to invest in multiple vehicles with lower time horizons rather than one 10-year plan, which might not net you the returns you were hoping for.

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What Is the Best Long-Term Investment?

There are many options available for long-term investors:

  • Stocks: Stock market buy-and-hold is a very traditional investment strategy. If you're picking the right stocks, you can usually ride out a lot of volatility and come out on top. The main risk factors here are picking the wrong stocks as well as overall market risk – if all stocks go down due to a stock market crisis, for example, you don't have a plan B in the way a hedge fund might use short-selling to hedge against market risk.
  • Dividend-paying company stocks: These are an excellent idea for investors who would like to have their investment pay out regular dividends in addition to the big return from selling off the stock later. Just keep in mind that preferred stockholders receive dividends first, so common stockholders might not gain a lot in dividends under certain circumstances.
  • Private equity firms: Private equity can net you impressive returns, but your investment will typically be highly illiquid. Under most circumstances, you'll have to wait at least a few years until you can even consider withdrawing your money.

Alternatively, you may want to try your hand at investing in funds. Mutual funds, stock funds, bond funds – all of these are set up to essentially employ the same investment strategies outlined above. Still, they may offer more regular payouts and lower lock-up periods, thus making them more liquid.

Hedge Funds as Long-Term Investments

Hedge funds such as CARL's quantitative investment strategies aren't usually considered to be long-term investments. Hedge funds are typically set up to go for smart investments that net big returns in the short term or medium term – no comparison to the time horizons of, say, private equity or buy-and-hold stock picking.

Hedge funds such as CARL's quants are open-ended, which allows you to drop in and out whenever you feel it's prudent – no need to stay invested in the fund if it's going through a rough time.

That being said, nothing should prevent you from staying with your chosen hedge fund for the long haul. The fund's individual investment decisions may be geared towards short-term returns, but you can stay invested for years or even decades, as hedge funds are open-ended. In fact, many of them have existed for decades with the same investor base. The benefit here is that you get more or less regular high-yield returns, which may be better in your personal situation than getting one big payout after 20 or 30 years. The downside is that while you remain an investor for a long time, the fund frequently changes strategies, invests in various assets and ventures, etc. In other words: The actual returns you gain from the fund may change over the years, as some of its investments pan out, and others do not.

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Are Long-Term Investments Good?

Whether long-term investing makes sense for you is up to your financial situation. If you're in doubt, you should consult a financial advisor to structure your investment portfolio. In general, putting all of your money into long-term investments may only be feasible for you if you can afford to have a portion of your wealth invested in highly illiquid strategies and you're ok with potentially only getting returns after a decade or two.

Dividing your portfolio into a few long-term and a few short-term investments can help you diversify your investments, limiting the overall risk you're exposed to.

If you're looking to get similarly impressive returns within a shorter time horizon, however, we suggest investing in quantitative hedge funds with the CARL app. These boast 15%+ targeted returns, usually within a shorter time frame, and since there are no lock-up periods involved, your investment remains highly liquid.

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3 Easy Steps to Start Investing With CARL

Investing in quants is as easy as pie if you've got CARL on your side. Investors can set up an CARL account quickly and easily.

Set Up Your Account

Quickly and securely create your account, verify your investor status and become a member of our community.

Analyze Investments

Using the tools within the CARL app, determine which strategies at what allocations are right for your investment goals.

Fund Your Investment

Simply save your portfolio settings and on the next strategy funding cycle your investment will be live!

Invest With CARL Today

CARL gives you access to sophisticated quantitative hedge fund investment strategies, provides you full control over your investments, and enables you to benefit from built-in risk-management features. And if all else fails, you can withdraw your investment in the blink of an eye as our quants have no lock-up periods. So why invest in long-term strategies that may not pan out at all if you can get 15%+ targeted returns at maximum liquidity in a shorter time frame? Download the CARL app today and set up your account to take full advantage of the power of quants.

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