Short Term Vs. Long Term

Short Term Vs. Long Term

The terms "short-term" and "long-term" are used in two contexts. They can be used to refer to the life of a security, or they can refer to the gain or loss incurred when a security in a fund's portfolio is sold.
SECURITIES
Short-term Securities
A short-term security is an investment vehicle with a maturity, put, or call period of less than one year. These instruments are considered safe and liquid and are the only securities that a Money Market fund may purchase. They are often purchased by other mutual funds as a means of investing cash for a short period of time. Short-term securities include commercial paper, banker's acceptances, negotiable certificates of deposit, U.S. treasury bills, federal agency discount A short-term security is an investment vehicle with a maturity, put, or call period of less than one year. These instruments are considered safe and liquid and are the only securities that a Money Market fund may purchase. They are often purchased by other mutual funds as a means of investing cash for a short period of time. Short-term securities include commercial paper, banker's acceptances, negotiable certificates of deposit, U.S. treasury bills, federal agency discount
Long-term Securities
A long-term security is an investment vehicle with either no maturity or a maturity of one year or more from issue date. Long-term securities include common and preferred stock, corporate notes and bonds, U.S. Treasury notes and bonds, municipal bonds, and GNMAs.
GAINS AND LOSSES
Gains and losses resulting from the sale of securities are categorized for tax reporting purposes by the length of time in which the security has been held in the portfolio.
SHORT-TERM applies to gains and losses on securities held NOT MORE THAN one year from their date of purchase.
LONG-TERM applies to gains and losses on securities held MORE than one year from their date of purchase.
NOTE: The holding period for each type of gain or loss is determined by current tax legislation. The holding periods given above are based on the Tax Reform Act of 1986. They are subject to change if new tax laws are passed.
In addition, GAINS are categorized as Short-Term 3 (Short-Short) if they result from the sale of an investment vehicle held less than three months. The Internal Revenue Code states that a fund may not derive more than 30% of its gross income from gains that fall into this category. If a fund DOES derive more than 30%of its gross income from short-term 3 gains, it will lose its status as a Regulated Investment Company.
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