What is Long-Term Investment?

Long-term investment is an investment strategy based on holding financial assets such as stocks, bonds, and real estate for extended periods ranging from 5-10 years or more, aiming to achieve gradual capital growth and benefit from the power of compound returns over time. This type of investment is characterized by focusing on long-term growth rather than quick profits, and tolerating short-term price fluctuations in assets, which helps reduce transaction costs and taxes compared to short-term trading, ultimately aiming to build wealth gradually and protect capital from the effects of inflation over the long term.

Best Stocks to Hold for Long Periods

• Apple (AAPL) - One of the best growth company stocks for long-term investment
• Microsoft (MSFT) - Technology and cloud computing giant with stable growth
• Amazon (AMZN) - Continued expected growth in e-commerce and cloud computing
• Google (Alphabet) - One of the largest global technology companies suitable for long-term investment
• Alibaba (BABA) - Chinese e-commerce giant with significant growth potential

Available Options for Long-Term Investment

• Common and Preferred Stocks - Shares in public companies with potential for capital growth and dividend distributions
• Government and Corporate Bonds - Loans to governments or companies with fixed returns and lower risks
• Residential and Commercial Real Estate - Direct investment in real estate or Real Estate Investment Trusts (REITs)
• Mutual Funds - Diversified portfolios managed by professional experts
• Exchange-Traded Funds (ETFs) - Track specific indices or sectors at low cost, such as technology and renewable energy
• Precious Metals - Gold and silver as protection against inflation
• Retirement Accounts - Long-term savings plans with tax advantages
• Startups and Growth Stocks - High-risk, high-potential return investments

Benefits and Advantages of Long-Term Investment

Long-term investment provides many important benefits and advantages that make it an attractive investment option for investors, including:

• Power of Compound Growth: Reinvesting profits and allowing gains to accumulate over the years can significantly amplify returns through compound growth, where profits generate additional profits over time, noticeably accelerating capital growth.

• Lower Costs: Reduced costs through fewer transactions and lower taxes on capital gains, as long-term investment reduces recurring transaction fees and commissions, plus long-term capital gains are subject to lower tax rates compared to short-term gains in most countries.

• Overcoming Market Volatility: Overcoming short-term market fluctuations and benefiting from the overall upward trajectory of the market, helping investors bypass temporary volatility and benefit from long-term economic growth and continuous technological development.

• Time Savings: Spending less time analyzing markets, strategic movements, and managing investment portfolios, saving investors from the burden of daily market monitoring and reducing psychological stress associated with short-term fluctuations.

• Reducing Behavioral Risks: Reducing the risk of making hasty decisions based on temporary movements, enhancing investment discipline and reducing the impact of emotions on financial decisions, leading to better investment results over the long term.

• Multiple Income Sources: Providing multiple income sources through capital growth and dividend distributions, contributing to gradual wealth building and achieving financial security for the future, especially for goals like retirement or children's education.

Profiting from Long-Term Investment

• Capital Growth: Buying stocks of companies with sustainable growth and strong financial fundamentals at low prices and holding them to achieve capital growth (example: buying Apple stock at $50 in 2015 and selling at $180 in 2025 = 260% profit)

• Dividend Reinvestment: Choosing stocks that distribute regular dividends and reinvesting these dividends to achieve compound growth and increase the number of owned shares (examples: major banks, utility companies)

• Diversification and Periodic Investment: Diversifying investments across stocks, REITs, and different assets using dollar-cost averaging strategy with periodic investment (example: buying shares of companies that own and lease real estate instead of buying real estate directly - investing 500 riyals monthly)

• Leveraging Time and Inflation: Benefiting from inflation in long-term asset values and starting early to maximize the power of time in investment growth (example: starting at age 25 instead of 35)

• Patience and Review: Avoiding selling during temporary declines and being patient through market cycles while reviewing and rebalancing the portfolio annually (example: not selling during the 2008 crisis, reviewing in January each year)

Long-Term Investment Tips

• Start Early and Invest Regularly - Allocate a fixed monthly amount and reinvest profits to benefit from compound growth
• Diversify Your Investments and Choose Strong Companies - Distribute your money across different sectors and focus on companies with stable profits and sustainable growth
• Ignore Short-Term Fluctuations - Don't monitor prices daily and don't sell during temporary declines, but be patient through market cycles
• Set Clear Goals and Review Annually - Define investment reasons (retirement, education, home) and rebalance the portfolio once yearly with performance analysis
• Comprehensive Financial Planning - Understand companies before investing and maintain a separate emergency fund to avoid forced selling

Disadvantages of Long-Term Investment

• Low Liquidity - Difficulty converting investments to cash quickly during emergencies, and you may be forced to sell at a loss
• Exposure to Long-Term Risks - Market volatility, economic crises, and political changes that may negatively affect investment values
• Missing Short-Term Opportunities - Inability to benefit from quick rises or active trading to achieve fast profits
• Inflation and Regulatory Risks - Declining purchasing power over time and changes in tax and investment laws
• Requires Patience and Discipline - Difficulty adhering to the investment plan during market fluctuations and the temptation to sell or buy frequently

Differences Between Long-Term and Short-Term Investment

Aspect	Long-Term	Short-Term
Time Period	5-10 years or more	Less than one year
Goal	Building wealth and retirement	Achieving quick profits
Risks	Lower risk over the long term	High risk due to volatility
Expected Returns	Stable and high returns	Volatile and uncertain returns
Taxes	Lower taxes on profits	Higher taxes on gains
Costs	Low fees (one purchase)	High fees (frequent transactions)
Required Monitoring	Annual review	Continuous daily monitoring
Impact of Fluctuations	Temporary fluctuations don't affect	Large and direct impact
Liquidity	Lower liquidity	High liquidity
Strategy	Buy and hold	Frequent buying and selling

Is Short-Term or Long-Term Investment Preferred?

Long-Term Investment is Better for Most Investors for the Following Reasons:

Why Long-Term is Better:

• Statistically More Successful - 90% of short-term traders lose their money
• Higher Returns - The US market achieved 10% annually over 100 years
• Lower Costs and Taxes - Fewer fees and preferred tax treatment
• Suitable for Everyone - Doesn't require extensive experience or time

When Short-Term is Preferred:

• If you're a professional trader with high expertise
• You have large capital you can afford to lose
• You have full time for monitoring and analysis
• You need immediate liquidity

Recommendation

For the average investor, long-term investment is the best and safest option for building wealth. You can allocate 80-90% to long-term investment and 10-20% to short-term trading at most.