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Best Brokers For Long-Term Investing

Written By

Jemma Grist

Written By

Jemma Grist

Jemma is a writer, editor and fact-checker focused on retail trading and investing. Jemma brings a unique perspective to the forex, stock, and cryptocurrency markets and works across several investment websites as a researcher and broker analyst.

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Edited By

James Barra

Edited By

James Barra

James is an investment writer with a background in financial services. He has worked as a management consultant, where he delivered large-scale operational transformational programmes at some of Europe's biggest banks. James authors, edits and fact-checks content for a series of investing websites.

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Fact Checked By

William Berg

Fact Checked By

William Berg

William contributes to several investment websites, leveraging his experience as a consultant for IPOs in the Nordic market and background providing localization for forex trading software. William has worked as a writer and fact-checker for a long row of financial publications.

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Updated

Jun 12, 2024

Buying and holding assets for an extended time can be a successful trading avenue and this guide aims to help you find the best brokers for long term investing. This article will run through what long term investing is and how it works. We also cover the different types of long term investing, the best assets to trade and how to compare top brokers.

What Is Long Term Investing?

We need to understand what long term investing is and how it works before we break down the best brokers for long term investing.

When people refer to long term investing, they usually mean buying stocks, bonds or forex and holding on to it for a significant amount of time, such as months or even years. Anyone with a pension is already investing in the long term. With a pension pot, daily fluctuations do not matter so much, the important factor is consistent growth over an extended period, with the goal being a healthy balance come retirement.

Long term investments work in a similar way to standard trading, just over a longer period. The same research and preparation are required but, instead of looking at daily price charts for different assets, you need to look over longer periods like a year or multi-year chart.

Long term investing is all about growth. If an asset is showing steady growth over a year or longer, it may be a good investment. The daily fluctuations are insignificant, sometimes the assets may be down and sometimes they may soar, but all that matters for investors is the overall growth. Investors may look to hold long term investments in companies that have shown steady growth and have reason to keep in that same vein.

Types Of Long Term Investing

When it comes down to it, there are many different types and forms of trading offered by the best brokers for long term investing. Here, we will go through a few different options and explain them.

There are two mindsets when it comes to long term investments. Firstly, you have held to maturity investments. This is when you purchase an asset or entity which you wish to keep until it has completely matured, with no intention of selling.

The opposite of this is available for sale investment. With an available for sale investment, the trader purchases the asset intending to sell in over a year. It is still a long-term investment, as the asset will be held for a significant time, but the goal is to sell the asset eventually.

Diving down the rabbit hole of stocks, there are a couple of different instruments offered by the best brokers for long term investing that you could go for. The first type is dividend stocks. As the name suggests, these are stocks that pay dividends, giving investors a regular cash pay-out.

Typically, stocks offering dividends are from older companies that have less need for their cash. Generally, these are a safe stock to go for. They are unlikely to skyrocket and earn loads but they produce a regular income.

That brings us on to another type, growth stocks. These offer high growth and high investment returns. A lot of the time these stocks are tech companies. Generally, all profits go back into the business and product, so they are unlikely to pay out large dividends. This type of long-term investment is very risky, stock prices can plummet when things go wrong but the success stories speak for themselves. Meta, Amazon and Apple are all great examples of how far these growth stocks can go.

Long-Term Investing Vs Day Trading

Long-term investing and day trading are two very different forms of trading and, while some firms will support both, the best brokers for long term investing likely offer more specialised services.

While the obvious difference between the two approaches is the time an asset is held, there are other variations in the two styles. Day traders are working over very short periods. Typically, an investor will purchase an asset and look to sell it within hours, minutes or even seconds.

When buying a stock, the intent is to sell it as soon as it hits a certain price. Equally, when shorting (selling), the intent is to buy it back when it’s dropped to a certain value.

Day trading requires a significant amount of concentration and effort. Investors must constantly check the market and charts to ensure they sell at the right time, only to rinse and repeat the process many times throughout the day. High fees can be incurred through day trading as commissions are generally charged on each purchase and sale.

Long-term investing is almost the opposite of this. When an investor purchases an asset as a long-term investment, they are not looking to sell any time soon. Typically, they will hold the asset for months or even years. The intent is to hold the asset and allow it to gain value over time, rather than waiting for it to hit a certain price.

Similarly, investors will sell the asset only once they can make a significant gain on it. Long-term investors do not have to spend as much time and effort monitoring the market. After the initial research and purchase, small fluctuations do not matter, they can check price charts at their leisure safe in the knowledge they will not be selling for a while. The fees are usually lower as there is only one sale after a long period. The main fee incurred by long-term investors is management fees.

Assets Suited To Long Term Investing

While CFDs may be offered by some of the best brokers for long term investing, they are not suited to such strategies. CFDs usually incur overnight interest charges. When you are selling on the same day or the next day, this does not matter, however, when you are looking to hold for months or years, these charges will build up and cost a lot more than the CFD is worth.

Spot investments are arguably a more attractive option. These are charged a commission when you sell but there is no interest or overnight holding fees. This suits long-term investments as it allows you to hold for as long as you want, without worrying about fees being incurred for the length of time.

In terms of specific assets to purchase, stock funds and ETFs are often considered a popular way to go. If you purchase a broadly diversified fund, such as an S&P 500 or Nasdaq-100 index fund, you will get a range of company stocks, both high-growth and high-dividend. These assets generally experience consistent growth and often recover from drops, for example, even though the S&P 500 dipped during the 2008 financial crisis, it had recovered to its previous level within a few years and kept growing.

Bonds are another asset offered by the best brokers for long term investing. When you buy a bond, you are essentially lending money to a company, corporation or government entity. This gives them the cash they need, while you earn interest on the repayments they make.

Generally speaking, there is a lower risk attached to these bonds. You are unlikely to get rich trading bonds but you may make a steady income over a long period.

Pros Of Long-Term Investing

These are the key benefits of finding the best brokers for long-term investing and capitalising on this trading style:

• Less trading fees
• Can earn dividends
• Less time-consuming
• Ride out market bumps

Cons Of Long-Term Investing

Our research showed these to be the disadvantages of long-term investments:

• Patience is required
• Lots of fundamental research required
• Could be long periods before profits are realised
• Generally lower annual returns than successful active trading

How To Compare The Best Brokers For Long Term Investing

So, you are looking for the best brokerage accounts for long term investing. Comparing different brokers can be difficult, so we have compiled a list of things to check for when you are trying to find a broker:

• Minimum Deposit: Look for brokers with lower minimum deposits, it will mean you do not have to put up as much capital upfront and can trade at an amount you are comfortable with.
• Funding Methods: What payment methods does the broker accept? Find a broker that accepts forms of payments you can use and does not charge high fees for deposits and withdrawals.
• Assets Available To Trade: When you are picking a broker, ensure they offer the assets you want to trade. If you are looking for stocks, check the stock exchanges they offer. If you want to trade forex or bonds, make sure they offer these.
• Trading Platforms: Check that the broker offers trading platforms that suit you. If you want to conduct trading on the go, check for a mobile trading platform.
• Fees & Commission: This is one of the most important ones. Long-term brokers may charge fees, such as annual maintenance charges (AMCs). Compare the fees of different brokers and try to find a suitably low one. Also, check what commission will be charged when you close trades.
• Customer Support: Compare the different levels of customer support offered. Ideally, you want a broker that offers 24/7 customer support with a range of methods for you to get in contact.

Long Term Investing Strategies

Strategies are important at any level of trading, and long-term investing is no different. These tips will help you build your strategies and trade effectively.

Diversify

Holding a diverse range of assets is often the key to trading successfully, whether you are with one of the best brokers for long term investing or not.

Firstly, you may want to not only invest in high-risk assets like stocks but also purchase bonds and other assets that are more steady. Secondly, holding a diverse portfolio leaves you less susceptible to market downturns. Yes, some of your assets may go through a hard time but diversification should ensure some of them will still perform well.

Separate Emotions

Do not think of an investment as you would a sports team. Be open-minded with investments, they will not all come off and you must be ready to ditch a loser. It is not worth staying with it just in case of an upturn,

Final Word On Best Brokers For Long Term Investing

Signing up with the best brokers for long term investing can open the doors to a profitable avenue, free from the constant chart checking of day trading.

Many assets are suitable for long-term investing, some of which carry more risk than others, but all have the potential to earn profits. Follow our comparison guide to find the best broker for you for long term investing.

FAQs

Will I Pay Tax On Profits From Trading With The Best Brokers For Long Term Investing In The UK?

Profits are often subject to tax with long term investing strategies. Depending on the amount of income, you may be required to pay capital gains tax or even income tax.

Do The Best Brokers For Long Term Investing Charge Overnight Fees?

Many of the best brokers for long-term investing do not charge overnight fees for most financial instruments, instead charging commissions. However, CFDs often incur overnight interest swaps, so be sure to check before opening any trade.

Can I Trade CFDs On A Long-Term Basis?

Yes, you can. However, they are likely to incur overnight fees, which will increase over time and likely wipe out profits that you earn over time.

Are Stocks Or Bonds Better From The Best Brokers For Long Term Investing?

Investors may do well from investing in both. Stocks are higher risk but have the potential for greater growth, while bonds are steady and should provide a more stable income.

How Often Should I Check Long-Term Investments?

You do not need to check charts as much as you do for day trading. Check as much as you feel comfortable with, be it once a week or once a month, safe in the knowledge that you do not intend to sell for a while and dips may be overcome.