A long-term investment is usually defined by how long an investor plans to stay invested, not by the maturity printed on any single instrument. On a crowdfunding platform, individual loans run 4–16 months, but investors build multi-year horizons by continuously reinvesting principal as it returns — a different mechanic from holding one long-dated bond.
Long-Term Investment: How the Horizon Actually Gets Built
What Is a Long-Term Investment?
A long-term investment is the type of investment when the capital is allocated with the assumption that it will remain at work for several years or more. The exact timeframe depends on the investor’s assessment and strategy that perceives particular risks and the investor’s tolerance for them in the long run.
What counts as a long-term investment?
Overall, every investment that spans several years can be considered a long-term investment. There is no universal rule that the investor should hold the assets with particularly long terms. Instead, the investor may keep one asset in the portfolio, leaving it untouched for 5 years, or they can reallocate those funds into splitting them and buying the several assets of the same type for the same 5 years earlier.
Long-Term vs. Short-Term Investing: What Actually Changes?
Long-term and short-term investments differ not only by the timeframe during which the assets are held in the portfolio but also by the actions that the investor takes once the capital becomes available for them again.
The investor who tries to gain short-term income may invest in the projects that have very little time until maturity (a couple of months). Likewise, they may withdraw the funds when the claim has reached maturity and immediately reinvest it in another short-term project with a different purpose. The investor who prefers long-term capital accumulation may take an entirely different approach and may buy the same instrument with the maturity in six months but then they may reinvest the money in the principal in another project and then another when the second claim has matured too.
How long should you hold an investment?
There is no universal single period for how long the investment should be held. The investment horizon depends on factors like the strategy’s purpose, liquidity requirements, willingness to tolerate specific investment risks, and the timeframe within which the money would be needed.
How a Long Horizon Is Actually Built
A long investment horizon usually relies on the investor not needing money soon enough to let it stay in the project long enough. The table below summarizes the approaches to long-term investment.
| Approach | What you hold | What has to happen for the horizon to hold | Main risk to the plan |
|---|---|---|---|
| Single long-dated instrument | One instrument with a multi-year holding period | The investor continues holding if for the intended period | Market, credit, and liquidity conditions may change |
| Ladder of short-dated claims with manual reinvestment | Short claims maturing at different times | Returned principal is repeatedly allocated to new claims | Comparable new projects may not be available |
| Automated reinvestment (AutoInvest) | Eligible Native project claims selected through predefined terms | Available capital continues finding eligible projects | Automation cannot guarantee project availability or returns |
| Mided approach | Long-duration holdings plus shorter reinvested claims | The intended allocation is maintained over time | Allocation drift, liquidity differences and reinvestment risk |
This is general information, not investment advice. Returns are not guaranteed, and none of these approaches removes the risk of loss.
Why Short Loan Terms Don't Rule Out a Long-Term Plan
Short loan terms do not rule out a long-term plan because they serve different purposes. Crowdlending investors would typically try to gain higher revenues in a shorter period. Since the claims that are offered on the market are mostly between 4 and 16 months before they reach maturity, short-term investors may want to allocate their capital and then withdraw it for an entirely different purpose. Long-term investment serves the strategy of capital accumulation; that is why continuous reinvestment in the same assets or longer timeframes is completely plausible.
Can short-term loans build a long term portfolio?
Yes, short-term loans can build a long-term investment portfolio. The investor who wants to pursue capital accumulation in the long run may simply purchase a 12-month claim, wait until it reaches maturity, and then reinvest the funds in the same asset, and then repeat the cycle again. Maclear offers AutoInvest to make investing simpler by giving the opportunity to design 10 strategies with a minimum of €50 per claim.
The Reinvestment Risk Nobody Mentions
Repeated reinvestment has a particular risk that does not exist exactly in the similar form for every investor, changing with each investor reallocating the funds according to their own strategy. The risk is future investment conditions that remain mostly unknown and impossible to predict precisely.
In case the investor waits until the short-term claim reaches maturity after 12 months and then tries to reinvest, they can see different interest rates, risk scores, AROI figures, and projects from different sectors on the market. That is why reinvestment cannot be static as the market circumstances and the choice of available projects change.
Maclear calculates expected returns on investment using Annualized Return on Investment, or AROI, metric. AROI has the following formula:
AROI = (Expected Earnings / Remaining Period) * (365 / Principal Purchased)
AROI describes expected returns, not a guaranteed investment outcome. That is why it should be considered as a theoretical evaluation of possible returns, not the prediction of factual investment performance. It is important to note that, since market conditions change and every reinvestment action is different, maturity matters and internal risk scoring matters too.
How to Choose Your Own Time Horizon
A short loan term does not make an investment protected: the principal is not guaranteed, and the Provision Fund is a shared reserve funded by 2% of fees from funded projects, not a buyback guarantee.
When the investor wants to assess the time horizon, they should start with evaluating the purpose of capital. The investor should be capable of understanding whether they could possibly need money in the short term or whether they are comfortable with long-term capital accumulation. Likewise, assessing one’s risk tolerance and risk perception is another important aspect of preparation.
If the investor wants to try a long-term investment strategy while doing it through reinvestment in short-term assets, they require discipline and careful capital management. If the investor has already withdrawn the principle multiple times instead of reallocating it, the span of the investment becomes significantly shorter. Likewise, if the investor uses AutoInvest or other automated tools for their strategy, they should not substitute their portfolio evaluation, diversification, and the assessment of every project with automatic reinvestment.
If the investor is willing to exit early, the only option is the Secondary Market. The investor may try to sell the claim at par or at a discount of up to 50% to another investor. The sale is not guaranteed. However, if the investor manages to secure a buyer, Maclear would charge a 2.5% seller fee, and the purchased claim will have a 30-day lock-up period on the buyer’s account. In case there is not a buyer willing to purchase the claim, it will be automatically de-listed from the Secondary Market after 14 days, according to Maclear’s GTC.
To summarize, the timeframe of the claim’s maturity and the investor’s implications are different. Some investors may prefer long-term assets, while others may constantly buy a shorter claim with a 12-month maturity period and reinvest again and again.
FAQ
What counts as a long-term investment?
The investment that is planned to be held for several years can be considered a long-term investment. The goals of a long-term investment portfolio may be capital accumulation, large purchases like a mortgage on a house, a new vehicle, a new business, or retirement. The threshold for the timeframe for “long-term” investment is conditional, not literal. It is either set by the rules of the particular investor or the asset class.
How long should you hold an investment?
The investor should hold an investment for a period that aligns with their goals. The threshold is individual and depends on multiple factors like risk tolerance, perceived risk profile, desired liquidity, and the purpose of the particular portfolio. There is no universal timeframe that defines the threshold.
Can short-term loans build a long-term portfolio?
Yes, if, supposedly, the investor purchases a claim with 12 months until maturity, then reinvests in the same claim again, waits until it has matured again, and reinvests again, this may become a long-term investment project. Reinvestment creates a mechanism of turning recurring short-term assets into the parts of a long-term portfolio by the constant reallocation of funds.
What is the difference between long-term and short-term investing?
The difference between long-term and short-term investing is in the frequency of reinvestment decisions and the different level of the investor's exposure to the changing circumstances upon each return of the capital. A long-term investment approach is not always synonymous with a long-term asset.
Does automatic reinvestment remove the risk?
No, automatic reinvestment does not remove the risk. AutoInvest on Native projects on Maclear (10 strategies per user with a minimum of €50 per claim) only automates decisions made by the investor. The investor sets the parameters for each strategy themselves.
About Maclear
Maclear AG is a Swiss peer-to-peer (P2P) lending and crowdlending platform, headquartered in Switzerland. The company acts as a financial intermediary in the non-banking sector and is a member of PolyReg SRO, in accordance with Swiss financial regulations, particularly regarding AML, KYC, and GDPR. Maclear provides individual and qualified investors access to carefully selected business loan opportunities, with integrated risk assessment, a Provision Fund, and a Secondary Market for liquidity.
The content of this article is provided for informational and educational purposes only. It does not constitute investment, financial, tax, or legal advice. Peer-to-peer (P2P) lending and crowdlending investments carry a risk of partial or total loss of capital. Past performance does not predict future results. Liquidity on a secondary market is not guaranteed. Readers are encouraged to conduct their own research and consult qualified advisors before making any financial decisions. The availability of products and services may be restricted in certain jurisdictions.