- Long-term investing typically means holding investments for 10 years or more, allowing you to ride out market volatility
- Short-term investments are generally held for five to 10 years
- Your investment outlook depends on your goals, time frame and appetite for risk
- The FTSE 100 has delivered an average annualised return of approximately 7.3%* over the past 20 years, demonstrating the power of patient investing
Understanding long-term and short-term investments
When you’re first starting out, it might be tricky to know the difference between long-term investing and short-term investing. Long-term investing typically means holding assets for 10 years or more, to meet goals that are further in your future.
Short-term investing, on the other hand, focuses on holding assets for around five to 10 years. This approach can suit those targeting shorter-term goals like a house deposit, wedding or special holiday.
To work out whether your investment approach is long-term or short-term, you need to think about what your goals are with investing. This is important as it helps to determine what your time horizon is, how much risk you might want to take and which account you should use. For example, are you investing for your retirement or a young child’s future, or for your next house move in five years or another shorter-term goal?
In part two of our ‘Investing for beginners’ series, Dan Coatsworth focuses on the importance of setting clear investment goals, and how they can be a strong motivator.
Hello. My name is Dan Coatsworth. Welcome to part two of AJ Bell’s video series on helping people to get started with investing.
In the previous video, I ran through the reasons why someone should consider investing in the markets compared with simply putting money in the bank.
In this episode, I’m going to shift the attention to investment goals – in other words, establishing the key reason why you want to put your money to work in shares, bonds or other asset classes.
If you have a specific goal at the start, it really helps to focus the mind and provide that ongoing incentive to stash away as much as possible.
Like many people, my first experience with investing was trying to save up for a house deposit. I was paying rent each month and that money was disappearing. I had nothing to show for it, apart from someone else’s roof over my head.
If you owned a house, you might pay the same each month in mortgage repayments as you would do in rent, but you’re actually amassing equity in a property. Once the mortgage is paid off, you own a whole house, which is quite an achievement.
According to Zoopla, the average deposit paid in 2023 by a first-time buyer in the UK for a three-bedroom house was £34,500, based on a £240,000 property price. Investing little and often can be a way of achieving that goal and getting on the property ladder.
There are plenty of other investing goals people aim for. Some have the goal of being able to build a pot of money that can fund an extension to their house or a loft conversion. Others might want to fulfil their dream of having a breathtaking wedding.
Those with children might want to invest money to help pay for their university fees in the future. Or there is the classic reason of simply wanting to build up wealth so as to travel far and wide during retirement.
Many of us will have pinned up a postcard of an exotic place on the fridge, dreaming of being able to visit such foreign lands. That’s quite an incentive to put money into an investment account each month and fulfil your dreams.
Sometimes investment goals aren’t only about treating yourself. It can be sound planning to build up a rainy-day fund as you never know what emergencies come your way that cost money.
You might want to change your lifestyle and consider retraining mid-career and that would require money to help pay the bills while you study. Or you might simply want to recharge your batteries and have a career break.
Some people get tired of working for others and want to start up their own business. This could require a chunk of capital upfront and that’s going to be much easier to stomach if you’ve already been contributing to an investment account.
Finally, you might want to invest to help others. This might involve investing in a portfolio of funds, shares or other assets with the explicit intention of passing this money to children or grandchildren after you die.
Everyone has different types of investment goals, but they can all be made easier by starting to invest as early as possible.
You can get help along the way in form of various Government or employer schemes that either top up your investment account with free money or provide tax-related benefits. We will cover the exact details later in this video series.
For now, thanks for watching and I hope you found the information useful.
Getting started with long-term investing
Before diving into long-term investment options, it’s worth checking if you’re ready to invest. Investing works best when you won’t need immediate access to your funds and can weather market ups and downs.
If you’ve already set your investment goal, it will help to determine which account to use for your investments and what tax relief you may get on contributions, meaning the government adds to your investment.
| Example goal | Investment account | Benefit |
|---|---|---|
| Any time horizon | Stocks and shares ISA | Invest up to £20,000 per tax year without paying capital gains or dividend tax on your returns |
| Pension | Self-invested personal pension (SIPP) | Gain tax relief on contributions, meaning the government adds to your investment |
| Buying your first home | Lifetime ISA | Receive a 25% government bonus on contributions up to £4,000 annually |
Read more about investing for beginners
Getting started with short-term investing
Short-term investing requires a different mindset. Because your money won’t be invested for as long, you’ll need to think about the level of risk you are comfortable taking. You may want to prioritise capital preservation over aggressive growth.
Understanding whether to stick to cash or invest is crucial at this stage. If you need your money within five years, cash may make more sense than investments. However, if your timeframe extends beyond five years and you can accept some risk, you might consider investing.
If cash is the right choice for you, AJ Bell’s Cash savings hub offers competitive interest rates on fixed-term savings accounts, perfect for saving towards a specific purchase within the next few years.
What is a good investment strategy for long-term growth?
A solid long-term strategy starts with consistent contributions rather than trying to time the market.
If you set up a monthly direct debit into your investment account, even small amounts such as £25 per month can grow significantly over decades. By investing regularly and automatically, you aren’t trying to time the market. This approach, called pound-cost averaging, means you buy more units when prices are low and fewer when they’re high, smoothing out market ups and downs.
No charges for regular investing
Our regular investing service lets you put as little as £25 into an investment of your choice every month without paying any dealing charges.
One-off investment: Starting from £1.50 dealing charge
Using our regular investing service: £0 dealing charge
Account and other charges, for example fund fees, still apply.
Why invest regularly?
Start investing from just £25 a month
Invest automatically at the same time every month
Focus on long-term goals instead of 'timing' the market
Cancel or change your regular investment any time
No charges for regular investing
Our regular investing service lets you put as little as £25 into an investment of your choice every month without paying any dealing charges.
One-off investment: Starting from £1.50 dealing charge
Using our regular investing service: £0 dealing charge
Account and other charges, for example fund fees, still apply.
Why invest regularly?
Start investing from just £25 a month
Invest automatically at the same time every month
Focus on long-term goals instead of 'timing' the market
Cancel or change your regular investment any time
Consider your risk tolerance and time horizon when selecting investments. If you’re saving for a retirement that’s 30 years away, you may be happy taking more risk by investing in more volatile assets. As you approach your goal, you may want to gradually shift towards more conservative holdings to reduce the risk of experiencing a big drop in your portfolio just before you want to use it.
What are the short-term investment options?
If your goal is short-term (five to 10 years), you may decide you want to take less risk with your investment options, prioritising capital security over aggressive growth.
Key short-term options could include so-called “cash like” investments, that target lower returns but take less risk along the way, meaning they should deliver a less bumpy ride.
Here are some short-term investment options:
Money market funds: Lower-risk investment funds that hold short-term debt issued by governments and companies. Money market funds aim to create a slightly better return than you’d get on cash in the bank.
Bond funds: With a bond, investors lend money to governments or companies, and in return they get regular interest payments and their original investment back at a set date in the future. There are lots of flavours of bond funds to choose from. Some stick mainly to government bonds, while others focus on corporate bonds issued by companies.
Short-dated bonds: Investors don’t have to buy a fund, they can invest in bonds themselves. Short-dated bonds are bonds that will mature (so repay the investor) in a short time, usually under two to three years.
UK Treasury Bills: Treasury bills (or T-bills) are short-term loans to the UK government. When you buy one, you’re effectively lending money to the government for a few months – typically one, three or six months.
Multi-asset funds: These funds spread money between different asset classes to give a diversified portfolio. Investors can opt for different risk levels of these funds to suit their needs, with the lower risk end of the spectrum investing more in bonds, money market options, cash and cash alternatives.
*Source: FE. Accurate to 26 May 2026
Frequently asked questions
What investment is best for the short-term?
The best short-term investment depends on your personal circumstances and how quickly you need access to your money. Short-term investments are generally where your investment goals are around five to 10 years away. If your goal is short term, you may want to prioritise capital preservation and liquidity over long-term growth. Consider your risk tolerance and when you'll need the money before choosing an option.
Where is the best place to invest for 6 months?
Investing is generally for goals five years or more away. For a 6-month timeframe, you'll typically want to stick to cash, whether that’s an easy-access savings account, a notice account or a fixed-term account for just six months. Look for accounts with competitive interest rates while ensuring your funds remain accessible when you need them.
Which is more profitable, long-term investment or short-term investment?
What you invest in depends on your time horizon but also your appetite for risk. If your goal is more short-term, you might want to take less risk with your investments and prioritise low returns and less volatility. Equally if your goal is long-term, you might be comfortable with taking more risk, targeting higher returns but experiencing more bumps along the way.
Get your money working for you
Our investment accounts
Ready to put your money to work? Then you’ve come to the right place.
Investment options
See the full range of investments that we offer, from stocks and bonds to AJ Bell managed funds.
Free regular investing
Get into the investment habit by putting in as little as £25 per month, and pay no dealing charges.
Disclaimer: These articles are for information purposes only and are not a personal recommendation or advice. The value of your investments can go down as well as up and you may get back less than you originally invested. Past performance is not a guide to future performance and some investments need to be held for the long term.