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Long term investments: stocks, bonds & strategies

Unsurprisingly, companies make long-term investment plans consisting of assets they intend to hold onto for a long time – more than one year. They can include things like bonds, cash, real estate, and long-term stocks and shares. Short-term investments, on the other hand, are usually sold quickly.

❓ What is a long-term investment horizon? A long-term investment horizon is considered to be 5-10 years or more.
🧐 Examples of long-term investments?Bonds, real estate, stocks and shares, retirement accounts, and mutual funds
⌛ The length of time for long-term investment is dependent on?An individual’s financial circumstance, investment goals, and risk tolerance
🙋 Which is less risky, long-term investments or short-term investments?Long-term investments are considered to be less risky because they can weather the stock market fluctuations

The same principles apply to private investors, although long-term investing is usually viewed as something you would keep for 5-years or more.

You can enjoy financial well-being in the present, beat inflation, and secure your long-term financial goals with a well-thought-out investment strategy, which usually encompasses both short-term savings, and investing for the long term. You can start investing long-term through Moneyfarm today.

What is considered long-term investing?

While holding onto investments for at least one year might be considered a long time from a corporate point of view, when it comes to private investments, to most financial experts, long-term investment strategies typically mean investments you would hold onto for five years or more.

The benefits of long-term investments – long versus short

Investing involves a certain amount of risk, which can make the value of your investment fall or rise. However, there are two acknowledged ways of reducing risk. One is to create a diversified portfolio (something we will return to later on), and the other is to invest long-term rather than short-term.

The logic behind investing long-term is nicely illustrated in the Moneyfarm blog on the subject of how often do I need to check for my long-term investments. A graph of an index on the S&P 500 in US dollars over 6 months shows a somewhat erratic and volatile performance. Another graph of the same index, but taken over 5 years, portrays a much steadier, upward climb.

It illustrates the potential dangers of encashing short-term investments when the market is in a downturn. With long-term investment stocks, you can ride out any short-term falls by waiting until the prices recover and begin rising again. This is still a risk, but it is considerably lessened.

Types of long-term investments

The best long-term investments come in the form of various asset classes, including:

  • Bonds
  • Exchange Traded Funds (ETFs)
  • Mutual Funds
  • Property
  • Stocks and Shares

Medium and long-term bonds

Fixed-rate bonds are savings accounts that offer you a fixed rate of interest over a pre-agreed period or term. The terms are 1, 2, 3, 4, and 5 years so they can be viewed as either medium or long-term investments or savings bonds. The longer the term, the better the interest rate, but you cannot access your money before the end of the term without incurring a penalty, nor can you add to your investment during the term.

For many investors, the best long-term bonds are investment bonds. Investment bonds in the UK are available as single premium life insurance policies detailed by a life insurance document. The investment company invests your money on your behalf until you either encash the account or pass away.

As the minimum investment for these types of bonds is £5,000, they are considered to be capital intensive. You can invest by way of a lump sum or in-stage payments.

The main attraction with fixed rate bonds, besides offering slightly better interest rates than ordinary savings accounts, is that they are considered safe investments. The interest you are paid is guaranteed.

Government bonds (sometimes called gilts or treasury bonds) are long-term investments available in 10 and 30-year terms and are attractive to some long-term investors because they are risk-free. Whereas corporate bonds can be rated anywhere from D to AAA. According to S&P, Moody’s, and Fitch, the major rating agencies, all UK government bonds have a top AAA rating.

Mutual Funds

A mutual fund is a kind of investment whereby you pool your money together with money from other investors. Mutual funds allow you the benefit of owning a collection of shares that you might not otherwise have been able to afford on your own. These types of funds are managed by a fund manager.

Types of mutual funds include those invested in stocks and bonds. They are sometimes mixed with money market funds which are short-term, relatively low-risk investments that pay dividends. Balanced mutual funds contain stocks, bonds, and money market funds and offer a balanced approach towards risk.

Bond Exchange Traded Funds (ETFs)

Exchange Traded Funds (ETFs) are pooled investments (similar to mutual funds) that track an index, sector or commodity. Bond ETFs contain only bonds. They are considered safer than traditional ETFs but usually offer lower interest rates. Some investors consider these the best ETFs for long-term investing (a) because they offer less risk, (b) because they offer regular, reliable dividend payments and (c) because they offer more liquidity than ordinary bonds.

Property Investing

Investing in property with a buy-to-let mortgage can provide both rental income and capital growth. Where interest rates on things like bonds are relatively low, many investors see property as offering higher returns. They are okay with it being relatively illiquid because they view it as a long-term investment. Investors who like real estate as an investment but who want better liquidity should consider REITs or REIT ETF investing.

Investing in stocks and shares

Long-term investment stocks are popular with many UK investors. However, investments in the stock market are risky, as share prices can be volatile. You really need to know how stock markets and share prices work; what the drivers are behind rises and falls, and how to trade stocks. If you don’t, it’s best to seek financial advice or consider stocks and shares ISAs.

Buying shares in individual companies is much riskier than opening a stocks and shares ISA. Not only are ISAs tax wrappers, but you can choose your level of risk. Also, an ISA portfolio contains a wide range of stocks in different companies in various industries, this diversification lowers the risk.

The risks and challenges of long-term investing

Investing carries risk. It doesn’t matter whether you are looking to invest long or short-term, there will always be a degree of risk. Short-term investing can be riskier unless you really know what you’re doing. Long-term investing is generally less risky, but whatever your investment strategy, there will always be an element of risk – even with the best long-term stocks.

One of the biggest challenges with long-term investing is making sure you won’t have to access your investments to cover unexpected costs. It’s best to clear any expensive debts and ensure you have some money set aside in an easy-access savings or Cash ISA account for emergencies.

How to choose the right investments for your long-term goals

There are plenty of good investment ideas in the UK, but your investor profile will determine the best types of investment for the long term (and the short term, too). We’ve already touched on the importance of diversification, and spreading the risk is key when looking for the best long-term investments.

Referring back to the section above on the types of long-term investments, we looked at bonds, exchange-traded funds, mutual funds, property, and stocks and shares. Which is the best long-term asset fund is very much down to an individual. It depends on many things, such as your financial and life goals and your risk tolerance.

If you seek higher returns and have a reasonably high tolerance towards risk, then stocks and shares could be for you. According to Investopedia, when added together, the total return on stocks, historically, is significantly higher than all other classes of assets. But, if you’re looking for how to achieve the best long-term investments, don’t concentrate on a single asset class – spread it around – diversify.

The best long-term stocks

The FTSE 100 is the UK equivalent of the US S&P 500. This is the best place to start when looking for the best stocks for long-term investment. According to, some of the top stocks worthy of consideration include:

  • AZN – AstraZeneca – (medical sector)
  • BHP (BHP Group) – (basic materials sector)
  • BP – (basic materials sector)
  • HSBA (HSBC) – (finance sector)
  • SHEL (Shell) – (oils and energy sector)
  • ULVR (Unilever) – (consumer defensive sector)

But as we’ve mentioned before, investing in individual companies can be risky. You might be better off considering Stocks and Shares or ETF ISAs. As well as being a diverse type of investment portfolio, this type of stock investing is a passive investment. It is managed and, where necessary, rebalanced by financial experts.

It’s a less risky way of gaining exposure to the stock market, and being a tax wrapper, your investment will grow free from capital gains tax. Withdrawals are also tax-free, and declaring an ISA to HMRC is not required.

In terms of the best account for long-term savings, an ISA is right up there.

Balancing your portfolio for long-term success

Whether you decide to manage your own stock and shares or open an ISA or a general investment account, avoid putting all your eggs in one basket. You can invest in various asset classes, including bonds, index funds, real estate and stocks and shares. You can even delve into riskier investments, such as cryptocurrency, provided it’s balanced out by safer investments.

Best practices for managing long-term investments

One of the best practices in terms of managing long-term investments involves checking the progress of your accounts from time to time and not getting spooked. Stock markets are volatile places. If you constantly check your accounts, you could suffer a knee-jerk reaction when the market or sector drops and panic sell. It’s the worst thing you can do. The stock markets always recover, even though it might take a couple of years. That’s what long-term investing is all about.

The other thing you must remember is the UK investment tax. If you’re not investing in tax wrapper accounts like ISAs, you will have to consider declaring tax on capital gains, dividend income, and withdrawals. That’s why ISAs are one of the best long-term investments to have. Providing you stick within your annual ISA allowance; you can ignore tax of any kind.


What are the benefits of long-term investments?

Long-term investments have several benefits, including significant growth and returns over time. Compound interest and dividends also help the value of your investment increase over time. Some long-term investments can be tax wrappers and help with capital gains taxes. Finally, long-term investments are usually less risky than short-term investments.

How can I minimize risk when investing for the long term?

Diversifying your investment portfolio is one way to minimize risk when investing for the long term. Investing across different asset classes and sectors can help to spread investment risk and reduce the impact of market fluctuations.

Can I withdraw money from a long-term investment before it matures?

This will depend on several factors, such as individual circumstances, the type of investment, and the terms of the investment agreement. Penalties or fees may apply for early withdrawal, so it is important to understand the terms and conditions of the investment before making a withdrawal.

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