When it comes to securing a comfortable financial future, long-term investments are by far one of the best strategies you can adopt to achieve your goals. Whether you’re new to investing or you’ve been building your portfolio for years, Flagship Investments can help you stay on track.
In this article, we’ll share everything you need to know about investing for the long term and provide our top five tips for long-term financial success so you can learn how to master the investment game today.
What is Long-Term Investing?
Long-term investing involves strategies designed to achieve gains over an extended period, typically beyond five years. This approach focuses on compounding returns and riding out market volatility to realise potential growth.
Why Invest in Long-Term Strategies?
Not only are long-term investments more sustainable than their short-term counterparts, but they are also more efficient and affordable.
Long-term strategies give your portfolio the opportunity to grow more over time while also protecting your funds from any short-term market volatility. Unlike short-term strategies such as day trading, long-term strategies also require fewer costs and less effort when it comes to buying and selling your assets and monitoring their progress. Learn how to master your long-term investments with the below strategies.
1. Stick to Your Plan
The best long-term investments are the ones that follow a consistent plan. Once you’ve established your investment goals for the future, it’s best to choose an investment strategy that aligns with these goals and then stick to it. Wavering from your chosen strategy could lead to risky, off-the-cuff decisions that can have a negative impact on your portfolio.
If you start to see a downward trend in the market, it can be tempting to sell your stocks and cut your losses. However, the beauty of long-term investing is it gives you the opportunity to ride out these downward trends rather than having to sell and lock in the loss.
2. Diversify Your Portfolio
Long-term investments such as stocks, real estate, and bonds can all work to maximise your returns in the future. While investing in one asset with a solid performance history can seem less risky than putting your faith in multiple different investments at once, the opposite is actually true.
The future is unpredictable, and every investment market has the potential to underperform, even if it has done well in the past. Spreading your funds across multiple different sectors and diversifying your portfolio can reduce the impacts of market volatility and protect your finances should one market not perform as expected.
To learn more, check out our top five ways to increase the diversity in your portfolio.
3. Don’t Get Caught Up in Trends
Sometimes, certain companies or investment strategies will skyrocket into success, whipping people up into a frenzy and prompting them to buy into the craze as fast as possible.
The problem here is that the majority of the time, these rapid successes are exactly that — rapid. More often than not, they’re over as quickly as they began, and people find they have paid top dollar for shares in a depreciating asset.
When it comes to long-term investing, the stocks, assets, and funds that are most likely to serve you are the “boring” ones with low-risk strategies and steady growth. While this may not seem as exciting right now, you’ll likely thank yourself in the future for not getting caught up in fleeting trends.
4. Reassess Your Portfolio Every So Often
This step may seem counterintuitive once you’ve committed to your investment strategy and have found stocks and assets that best match your financial goals. However, it’s still important to check in on their performance every so often to ensure the investments you made initially are still on target.
While it’s important not to get swept up in trends, it’s also important to know when your investments are no longer on track to serve you in the long term. Share investing can be unpredictable; mutual funds may change strategies and no longer align with your goals, and companies can change hands and no longer be the safe investments they once were.
There’s no problem with getting rid of any investments that don’t serve you anymore and reinvesting the money into assets that are more in line with your financial goals. A yearly portfolio review can help you stay on track to meet your financial goals on time.
5. Invest in Managed Investment Schemes
A managed investment scheme can give you access to an expertly crafted portfolio that aligns with your financial goals. These schemes can come in numerous forms, but the most popular ones include:
- Mutual funds
- Listed investment companies
- Property schemes and REITs
- Exchange-traded funds
When you invest in a scheme that is actively managed, you’ll have the benefit of your fund manager implementing all four of our previous tips on your behalf. These fund managers can make the most informed decisions for your long-term investments, giving you true peace of mind and strengthening your financial future.
Your Questions Answered
New investors should focus on setting clear financial goals, consulting with financial advisers, and starting with diversified, lower-risk investments.
Rather than choosing specific companies to invest in, we recommend researching various companies from a wide range of industries. Look for businesses with a proven track record of stability and consistent growth. They should be resilient and deliver goods and services that will always be in high demand. Consider ESG factors and opt for companies that interest you.
While both approaches have their advantages, long-term investments are more sustainable and can deliver higher returns. Compound growth allows your investment to generate earnings, which are then reinvested to generate their own earnings, essentially creating a snowball effect over time. This means that with patience and the right strategy, long-term investments could considerably swell your financial portfolio.
While short-term investments can pay off, they are not sustainable, often involving greater risks and requiring more active management.
Long-term investments are those typically held for five years or more.
