Investing Portfolio Management How to Achieve Your Best Investment Performance With Long-Term Funds By Kent Thune Kent Thune Twitter Kent Thune has spent more than two decades in the financial services industry and owns Atlantic Capital Investments, an investment advisory firm, in Hilton Head Island, South Carolina. He's written hundreds of articles for a range of outlets, including The Balance, Kiplinger, Marketwatch, and The Motley Fool. learn about our editorial policies Updated on March 5, 2022 Reviewed by Andy Smith Reviewed by Andy Smith Andy Smith is a Certified Financial Planner (CFP), licensed realtor and educator with over 35 years of diverse financial management experience. He is an expert on personal finance, corporate finance and real estate and has assisted thousands of clients in meeting their financial goals over his career. learn about our financial review board Fact checked by Vikki Velasquez Fact checked by Vikki Velasquez Vikki Velasquez is a freelance copyeditor and researcher with a degree in Gender Studies. Previously, she conducted in-depth research on social and economic issues such as housing, education, wealth inequality, and the historical legacy of Richmond VA as well as their intersectionality while working for a community leadership nonprofit. Vikki leverages her nonprofit experience to enhance the quality and accuracy of Dotdash's content. learn about our editorial policies Share Tweet Pin Email Photo: Christie & Cole Studio/Photographer's Choice RF/Getty Images When you hear an adviser recommend a "long-term" investment or you read a financial news article about being a long-term investor, what does that mean? How many years is long-term how does one go about investing for the long-term? Definition of Long-Term Investing Long-term, with regard to investing, generally refers to a period greater than ten years. This is also generally true for categorizing investors as well as bond securities. For example, if an investment adviser asks questions to gauge your risk tolerance, they are seeking to determine what investment types are suitable for you and your investment objectives. Therefore, if you are young and you don't expect to make withdrawals from your brokerage account for at least ten years, you may be considered a long-term investor. Bonds and bond funds are categorized as long-term if the respective maturity (or more accurately what is called duration) is longer than ten years. The Best Options for Long-Term Investments The first investment type most people think about long-term investing in is stocks. This is because they have historically achieved higher average rates of return than other investing and saving vehicles, such as bonds and Certificates of Deposit (CDs). Stock mutual funds are an interesting way to invest in the stock market, especially growth stock funds and aggressive growth stock funds. Many long-term investors also like to use index funds for their low-cost and their tendency to average good returns over long periods, such as ten years or more. Analysis and Research for Long-Term Performance Funds When researching and analyzing investments, especially mutual funds, it is best to look at long-term performance, which can be considered a period of 10 or more years. However, "long-term" is often loosely used about periods that are not short-term, such as one year or less. This is because 1-year periods do not reveal enough information about a mutual fund's performance or a fund manager's ability to manage an investment portfolio through a full market cycle, which includes recessionary periods as well as growth and it includes a bull market and bear market. A full market cycle is usually 3 to 5 years but can last longer. This is why it is important to analyze performance for the 3-year, 5-year and 10-year returns of a mutual fund. You want to know how the fund did through both the ups and the downs of the market. Often a long-term investor employs a buy and hold strategy, where mutual funds are selected and purchased but not significantly changed for up to several years or more. This strategy has also been affectionately labeled the lazy portfolio strategy. How to Be a Long-Term Investor A long-term investor can afford to take more market risk with their investments. Therefore, if they don't mind taking a high relative risk, they may choose to build an aggressive portfolio of mutual funds. Aggressive investors are willing to accept periods of extreme market volatility (ups and downs in account value) in exchange for the possibility of receiving high relative returns that outpace inflation by a wide margin. A sample aggressive portfolio asset allocation is 85% Stocks, 15% Bonds. The Balance does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Investor.gov. "Bonds." Accessed April 27, 2021. Investor.gov. "Stocks." Accessed April 27, 2021.