Preparing for your future isn’t easy, although it’s something that you should do as early as now. While crafting your plan, you’ll probably find some financial goals that will be best achieved through a long-term investment strategy.
Keeping investments for a long period of time means that the money you put in them shouldn’t be touched for several years. To make the best of them, here are 3 things to remember.
Make sure your investments match
Long-term strategies are usually meant for wealth creation and to give you income years in the future. Since you will be holding on to them for quite a while, you will be able to weather the typical ups and downs of the market easier.
This makes certain types of products a good fit for a long-term investment strategy. Stocks, for example, tend to fluctuate in price in a short period of time, but are likely to keep going up over the years. Plus, some companies give dividends to reward their shareholders, and these can add up.
In comparison, products with a short maturity (like Treasury bills) may not offer the same potential for returns, even if compounding interest is used for the same duration.
Diversify your portfolio
With a long-term strategy, the chances are high that you’ll be getting investments that mostly fit an aggressive risk profile. To help spread this risk, your portfolio should be diversified. This can keep your investments from being too impacted by an event that affects one industry.
A diversified portfolio may also help keep you from missing out on potential returns from an industry that is seeing positive growth. Don’t forget that you can diversify across asset classes as well as industries.
Invest regularly
Starting your long-term strategy is great, but it doesn’t stop when you make the first investment.
Adding money periodically will help you take advantage of peso-cost averaging and can increase the chances of good returns in the future. This works especially well with managed funds that follow an index, because these are already diversified to a certain extent and usually contain only blue chip stocks.
Investing regularly lets you add to your investment when prices are low, and that balances out how much you’ll be paying when prices are high.
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