8 Simple Long-Term Investment Strategies That Work
Simple Long-Term Investment Strategies That Work |
The keys to success include investing early and separating emotions from objectives.
"In everything the middle course is best: All things in excess bring trouble to men"--Titus Maccius Plautus. Balance serves as the ideal metaphor for long-term investing.
Here are some of the most important simple key strategies that really works for long-term investment.
1. Invest in what you understand
Most seasoned investors have one piece of advice: Understand what you are investing in – or rather, do not invest in what you do not understand.
"If you don't understand the business you invest in, you're going to be highly unlikely to discern the noise from truly meaningful information that should factor into your decision-making," says Thomas Sudyka Jr., president of Lawson Kroeker Investment Management in Omaha, Nebraska
No one became a good investor by playing the blame game. It is not about the stockbroker telling you what share to buy but also about you taking the time to understand why that share is a good investment. Think through the business the particular company is in, and understand why it will grow.
2. Start investing as early as possible
The longer money is invested, the more potential it has to grow. "Investors who start early, practice patience and stick to a long-term investing strategy often see the best returns and financial success," says Colton Dillion.
Most investment products fluctuates their returns and tend to underperform in the short run but evens out the losses over the long term. Sticking to a long term investment plan requires you to start as early as possible irrespective of the initial investment amount--for the most important thing is to start now and not necessarily the amount.
3. Observe sound cash-flow management
Many small-business owners fail because they do not know the difference between profit and cash flow. As a result, many very profitable businesses go broke. They fail to realize that profit and cash flow are not the same things.
Business owners need to see the two types of cash flow if they want to be successful. There is actual cash flow and phantom cash flow. It is the awareness of these two cash flows thatmakes you rich or poor.
Jesse Mackey identifies that "There's no other element of investment planning or portfolio management that's more essential over the long term," The key is simple yet crucial. Automatically invest money during your working years – each month at the very least. "Simply adhering to the cash-flow plan, while making reassessments as life progresses and needs change, will put an investor 90 percent of the way toward achieving their goals"-- Mackey.
Cash flow is to a business like blood is to the human body. ''Nothing can impact a business more dramatically than not being able to make payroll one Friday''--Sharon notes. Proper cash flow management starts on the first day you begin your business.
4. Separate emotions from objectives
Objectives are far different things compared to your emotions and they must be treated in their respective accordance. If you treat an investment possibility with the same partisanship as a sports team fan [or hater], you're setting yourself up for trouble. Separating your emotional involvement with a security from the purpose of its ownership will lead to better overall judgement and performance. The more open-minded you are to thinking about investments in a new light, the more likely you are to invest in something undervalued.
5.Turn discretionary spending into investing
Those who delay investing for years often confuse needs with wants. "Cellphone bills, cable TV packages and automatic services of all kinds gradually become necessities, and the would-be investor never jumps out," says Stig Nybo, president of U.S. retirement strategy for Transamerica Retirement Solutions in San Francisco. "Investing takes discretionary income, and discretionary income takes discipline. Question those things that have become the norm but may not be necessities."
6. Separate investments from cash reserves
Whether you have a substantial investment portfolio or haven’t started investing yet, you need to understand the fundamental building blocks of an investment portfolio. Keeping cash in hand to cover several months’ worth of your living expenses, if necessary, is a smart risk management and financial planning concept.
You never know when a catastrophe may strike. A catastrophe affects many aspects of our lives, both personally and financially. In nearly every event, money is part of the solution — sometimes the only solution. Imagine how losing your job or having a new job fall through, not being able to sell your house, having a major medical bill, or having a sick child or pet would impact your financial life. The purpose of having access to money at very short notice is to protect you from risks you can’t afford to bear as best as reasonably possible.
The biggest risk in investing involves needing your money at the wrong time. By balancing any funds you'll need in the next three to five years, or roughly an economic cycle, between a money market account and high-quality, short-term bonds, you won't have to sell your investments at a loss. You'll have liquid funds available when you need them, even if the market has crashed.
7. Make stocks a cornerstone of your strategy
Stock investments is described as one of the greatest wealth-creation tools known to mankind. Investors need them in their attempt to grow their portfolio and outpace inflation.
The returns on stock investment is uncertain, and as it underperforms in bad market times, so does its upward rewards are unrestricted and unlimited.
8. Diversify for a smoother ride
Horror stories abound of investors too tied to a particular stock or other investment, says Jimmy Lee, founder and CEO of the Wealth Consulting Group in Las Vegas. Diversifying across asset classes as well as within asset classes is a smart way to go. For example, equities come in different flavors when it comes to characteristics such as market capitalization, Ghana versus foreign or growth versus value. Though it doesn't ensure a profit or protect against a loss in a declining market, being diversified provides the potential for a smoother ride.
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