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What are long-term investments?


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What are long-term investments?
Long-term investment is an account on the assets side of a company's balance sheet that represents a company's investment, including stocks, bonds, real estate, and cash. Long-term investments are assets that the company intends to hold for more than a year.


The long-term investment account differs greatly from the short-term investment account in that short-term investments are likely to be sold, while long-term investments will not sell for years, and in some cases, may never sell.
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Being a long-term investor means that you are willing to accept a certain amount of risk in pursuit of higher potential rewards and that you can afford to be patient for a longer period of time. It also suggests that you have enough available capital to link a specific amount over a long period of time.
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Long-term investment is an account that the company plans to maintain for at least a year, such as stocks, bonds, real estate, and cash.
The account appears on the asset side of the company's balance sheet.
Long-term investors are generally willing to take more risks for higher rewards.
These differ from short-term investments, which will be sold within a year.
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Long-term investments
The clearest long-term investment
A common form of long-term investment occurs when Company A invests heavily in Company B and gains significant influence over Company B without acquiring the majority of voting shares. In this case, the purchase price will be shown as a long-term investment.

When a holding company or other company purchases bonds or shares of common stock as investments, the decision to classify them as short or long term has some somewhat important implications for the way these assets are valued on the balance sheet. Short-term investments in the market are distinguished, and any impairment is recognized as a loss.

However, increases in value are not recognized until the good is sold. Therefore, the classification of the balance of an investment, whether long or short term, has a direct impact on the net income that is recorded in the income statement.

Investments held to maturity
If the entity intends to hold the investment until it matures and the company can demonstrate its ability to do so, it is observed that the investment is "held to maturity". The investment is made at cost, although the premiums or discounts are amortized over the life of the investment.

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For example, the classic investment to maturity was the purchase of PayPal by eBay in 2002. Once PayPal significantly developed its infrastructure and user base, it launched as its own company in 2015 with a five-year agreement to continue processing payments to eBay. This investment helped PayPal grow while allowing eBay to benefit from having a world-class payment processing solution for nearly two decades.

The long-term investment can be written to adequately reflect a low value. However, there may be no adjustments to temporary market volatility. Since investments must have an expiration date, the securities cannot be classified as held until maturity.

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Available for sale and commercial investment
Investments held for resale during the year for short-term gains are classified as current investments. Commercial investment may not be a long-term investment. However, the company may continue to invest with the intention of selling in the future.

These investments are classified as "available for sale" as long as the expected sale date is not within 12 months. Long-term investments available for sale are recorded at cost when purchased and subsequently adjusted to reflect their fair values at the end of the reporting period. Unrealized gains or losses from holding are retained as "other comprehensive income" until the long-term investment is sold.

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I will say this - long-term investment is profitable from the point of view of financial planning and that is what gives you the opportunity to do something else in parallel.
But on the other hand it requires quite detailed market research and very serious analysis. And this is really difficult.

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