Long-Term Investment Strategies

Long-term investment strategies can help you save up for your future financial goals. Investing long-term can also help you secure the funds you need for retirement. A long-term investment strategy requires careful planning and patience. Learn about a few long-term investment strategies you can implement in your portfolio.

Why Invest Long-Term?

A solid investment strategy includes both short- and long-term investments. Here are a few reasons long-term investing is just as important as investing in the short term:

• Less focus on market fluctuations: The stock market can be highly volatile. When you invest in the stock market long-term, you can focus less on the expected ups and downs and more on your long-term returns.
• Take advantage of compound interest: Compound interest is the return that comes from your accumulated interest and initial principal, allowing you to multiply your earnings.
• Ability to reinvest your returns: Reinvesting your returns, or dividends, means you have more money to invest. Reinvesting your returns can also allow you to defer taxes until you withdraw the funds completely.
• Less time-consuming: Short-term investments often require monitoring the market and making quick decisions. Long-term investment strategies are more hands-off, meaning you can invest without having to dedicate a lot of time doing so.
• Opportunity to invest in passions: Long-term investments allow you to invest in businesses or industries you’re passionate about.

The biggest advantage of long-term investments is the potential for compounding interest. The stock market can be volatile at times, and investing more helps you earn more when the market is up.

Long-Term Investment Strategies

Here are some long-term investment strategies to consider as you plan your portfolio:

Diversify Your Investments

Both short- and long-term investing always come with some degree of risk. Diversifying your investments across multiple types and industries can help you offset losses in one category by earning returns in another.

Diversify your investments across categories such as growth stocks, stock funds, bond funds, and dividend stocks. You can even invest in areas such as real estate, small businesses, ETFs, and mutual funds. Choose a balance of high-risk, high-reward and low-risk, low-reward investments to offset market fluctuations.

Commit to the Long Term

Some long-term investments can be volatile. Trying to time the market or withdrawing your funds when the market dips can cause you to lose money.

When you commit to the long term, you can ignore the ups and downs that come with the stock and real estate markets because you know returns are more likely when playing the long game. Historically, long-term investments have outperformed the market more than trying to time buying and selling stocks.

Set up Automatic Investments

Automatic investments can help you increase your wealth in several ways. When you automatically transfer a few dollars per paycheck to your long-term investment of choice, you’re unlikely to notice the money’s even gone.

By doing this, you’re also diversifying your investments because you’re buying at different price points. Most bank accounts today have features that allow you to automatically transfer a set amount each month, which can make investing in your future easy.

Clarify Your Financial Goals

A long-term investment strategy can be anything you plan to invest in for more than five years. Some people’s long-term goals, however, might be as short as three or four years. Clarifying your long-term financial goals can help you choose the best investments for your portfolio.

Consider what you want to use the funds for and the latest you can withdraw your investments. For example, if you plan to withdraw your funds to pay for your child’s college education, calculate how many years you have. Try to choose a timeline over a wider range, so you can carefully plan your withdrawal when the market is at its best.

Start Investing Early

It’s never too early to start investing. The more time you spend in the stock market, the more opportunity you have to earn returns. When you factor in compounding interest, you can significantly increase your financial wealth by investing early.

Reinvest Dividends

Dividends are funds companies pay out to shareholders on a regular basis. You can cash out these dividends or reinvest them.

Automatically reinvesting your dividends allows you to buy even more stock in the business, which lets you take advantage of compounding interest. The more you invest in that company, the more you might receive in dividends, creating a profitable payout cycle.

Schedule Routine Financial Checks

Automating your long-term investment strategies is a great way to build wealth without much effort. However, it’s also important to check on your investments regularly and decide if you need to make any changes.

Review your financial portfolio at least once a year. Allocating additional funds or moving funds between investments might provide you with a better return.

Value Invest

Value investing involves buying into businesses that are currently undervalued. These companies often produce higher returns if they become profitable. While these investments tend to be riskier than others, they also have the potential to pay off significantly.

Fund Your Retirement

Funding your retirement is an important long-term investment strategy to consider. The earlier you begin funding your retirement, the more you can contribute because of compounding interest. Using investment accounts geared specifically toward retirement also offers you additional benefits.

A 401(k) defers your taxes. Some employers even match 401(k) contributions up to a certain amount, which is essentially free money from your employer. A Roth IRA helps reduce your earnings for the year by the amount you contribute, which can bring down your tax liabilities.

The best long-term investment strategies are automated, carefully planned, and routinely reevaluated. The earlier you start, the better, but it’s also never too late to begin investing in your future.

Need help getting started on your long-term investment strategy? Sign up for one of our stock trading or real estate seminars, where you can learn valuable tips and tricks for funding your future. You can also sign up for a free account to access our Infinity Investment Workshop online trading classes.

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