9 Principles for Successful Long-Term Investing

Having investments is almost a full-time job. Beyond the belief that investing is based on sleeping while money creates itself, in reality it is about being very attentive to trends, measuring the performance of investments, making constant reviews of properties, analyzing the behavior of the stock price or cryptocurrencies, and many other actions of each investing market.

The task of maintaining an investment portfolio can become even more difficult if we start thinking in the long term, since other factors come into the equation: such as inflationary processes, economic crises, financial policies, or any other situation that is beyond our control as investors.

To prevent our money from going to waste over time, or that we simply end up not receiving the results we expect, it is very important that we think about our investments in the long term.

For that reason, below, we will give you 9 tips to maintain your investments over time and not fail along the way.

Let’s get started!

Keep in mind your investment objective

It is always important to have an investment plan, but we know that sometimes it can be difficult to stick to a very long-term plan, especially when we think about the future in 10, 20, or 30 years. In this case, rather than making a “perfect” plan about your investments, it is better that you know very well what your objective is.

  • Do you want to live a full life after your retirement?
  • Are you thinking about college for your children?
  • Do you plan to have your own business?
  • Do you want to buy the house of your dreams?

We could say that a long-term investment exceeds 5 years, and taking into account what your objective is, you will be able to make better decisions about what type of investments to make, how much money you should invest, and how to make your portfolio evolve to increase your capital.

Urban Wealth Management financial planner, Derenda King, says that if you’re thinking about investing in your child’s college future who is 15 years away from being a student, you may be taking bigger risks with your money. In case any situation occurs during that period, the person will have more time to recover their portfolio and reduce losses.

Understand the risks of investing

Investing involves risks, and that is something we must live with from the moment we decide to grow our money. When this is not clear and there are bad times in the markets, people can fall into disappointments that make them make bad financial decisions.

When you assume that you will have losses no matter what type of investment you have, then you will have more control over your money in the long run.

Of course, this point is not to say that you should sit idly by when making losses. You should always be very attentive to the markets and the factors that directly affect them.

For example, stocks are often a riskier form of investment than bonds. These are often impacted by news, economic policies, and third-party decisions. It is important to clarify that when we say that they are often impacted, we speak both negatively and positively.

For example, on April 1, 2022, shares of Twitter were worth $39 dollars, and on the day the deal was sealed with Elon Musk to buy the company, shares peaked at $51.70 dollars. This is an example of the impact of independent decisions on the stock market.

Yes… Some investment options are riskier than others, which is why it is very important to keep the following point in mind.

Diversify. Diversify. Diversify!

Get into the habit of diversifying your investments in different markets

We will never get tired of saying it, the best way to maintain an investment portfolio that is profitable over time is to diversify it. Especially when it comes to keeping your investments for the long term, a diversified portfolio can bring you big profits thanks to the evolution of the markets.

The biggest benefit of this is that even though some markets will drop at some point, not all of them will drop at the same time, or at least the chances of that happening are quite low. Similarly, some markets will start to rise more than others, making your income come more from a specific type of investment.

For that reason, our next advice is very important…

Check your progress

Over time, the diversification of your portfolio will allow you to receive more income from a particular investment, so it is important that you always try to reach a balance.

For example, let’s say you’ve put 60% of your capital into stocks. After a certain time, the evolution of the markets can make your capital in the stock market become 75% of your portfolio, so it would be an excellent idea to reinvest part of that money in other markets in order to further diversify your portfolio, and keep growing.

It is very important to maintain that balance in your portfolio, since the financial conditions will never be the same as the first moment you decided to invest. Also, if a single market has so much weight in your income, a drop can be very damaging to your finances.

Don’t try to time the market when investing

There is a practice that many people want to implement without exactly measuring the risks that this brings to their investment portfolio. It is known as “timing the market”.

Many people try to move their money in and out of the markets based on predictions about how the stock price will move.

For example, when markets are expected to drop, many people try to sell their stock just before it happens. Then, when the downturn comes, they buy more shares with the money they got and wait for the market to correct itself.

This is an extremely risky practice that, in addition to being difficult to achieve, greatly puts your investment portfolio in danger, as well as your long-term income.

When it comes to stocks, you never really know when prices will drop, or when they will rebound. It is even impossible to really know if a market will fully recover and return to the levels at which it was before.

Invest against inflation

investing today
When investing, always think about your future and different ways to protect yourself

Regardless of which country you are in, surely your economy has been affected by inflation at some point. Particularly in the times in which we live, it is very important that we take into account any phenomenon that may affect our finances and investments.

Even a percentage that can be considered low can generate a great impact on the markets in the long term. For example, a sustained inflation of 3% for 20 years can make a $23,000 dollars car cost $41,540 dollars. A $1,000 dollar item can be worth $1,800 dollars under that index. Now just imagine what happens to the properties, and anything else that ends up making our money worth less.

Over 20 years, a relatively low inflation rate can cut your retirement savings in half, which is why it’s so important to constantly monitor our investment portfolio.

Now is there a solution for this?

Well, investments are the answer. Historically, real estate increases in value and gives relatively steady returns. Long term bonds are also made to keep your money protected. Stocks are another element that throughout history have overcome inflationary processes, offering very good long-term returns.

Be careful with you investing costs

Investing has its costs, and this is something you should always keep in mind within your budget. Whether in real estate, stocks, cryptocurrencies, exchange-traded funds, or any type of investment, there are always expenses specific to each market that you must assume.

For example, if we talk about real estate, your expenses vary a lot according to the type of property you buy, how many remodels you have to do, or what you want to add to the property to make it more attractive.

When it comes to stocks or cryptocurrencies, many times, we must acquire special equipment or pay commissions and memberships in platforms to be able to make our transactions.

When it comes to investing in ETFs, you must pay an annual expense ratio, which is what it costs to run that fund each year. In this case, it is recommended to make investments with expense ratios that are below 0.25% per year so that in the long term the impact is not so strong.

Take into account that you may live longer than you think

Many people plan their investments with retirement and the time they have left to live in mind. If you make projections for your old age, you must take into account that you may live longer than you consider, so it is better that you put together your investment plan very well.

Currently, a man reaching age 65 can expect to live on average to 84. For women, the average age of life is 86 years, and this longevity rate may continue to rise.

JPMorgan research reveals that 68% of people think they need more than $500,000 dollars for their retirement, but the average person currently has savings of around $130,000 dollars, which probably leaves them with a very small budget to spend the last years of their lives.

What can we do about this? Our next tip is the ultimate solution…

Start investing as soon as possible

The advice of all the experts is to start with your investments as soon as possible, even when it is with little money. Not only will this give your money more opportunities to grow, but it will also make you wiser in the markets you choose.

Keep in mind that investments work like a snowball. When you invest money, and then take some of your money to reinvest it, it will just keep growing.

Invest early, and update your portfolio constantly. That is the best advice we can give you!

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