5 Tips on Succeeding at Long-term Investing

• Author: William Asher
• Posted: 2024-11-06

Successful long-term investing is not for the faint-hearted. It would be best to have perseverance, discipline, proper planning, patience, and determination. Investment entails winning small battles and working towards accomplishing success in the end. Whether you want to save for retirement, accumulate finances for your kid's college fees or purchase a home, long-term investment is the way to go. Here are the tips to help you succeed at that.
 

1. Understand Your Financial Goals

Before you start investing for long-term purposes, understand your financial goals. You cannot achieve any investment goal without having a clear objective and vision of why you are investing. You should divide your goals into short, medium, and long-term buckets. Short-term goals go for six to twelve months, and medium-term goals require three to five years for success.

Additionally, you will need about ten years or more to accomplish your long-term investment goals. After identifying your goals, estimate the amount you need to achieve them. That will enable you to plan your finances and motivate you to carry on with your investment plans until you accomplish your goals.
 

2. Start Investing While Still Young

Since you need patience and discipline to succeed at long-term investing, starting as early as possible is essential. When you start investing early, you will gain financial discipline from compounding. Compounding is one of the best ways to create wealth and help you get a more significant interest.

For example, if you are 24, you can gain a larger corpus if you start investing now than if you wait until you get to 30. Hence, you'll get several benefits when you start investing early. Your money will have more time to grow, which enables you to counter inflation.
 

3. Consider Investments with a Long Confinement Period

The other way to succeed at long-term investing is to choose instruments with a long confinement period, such as the NPS or PPF. Lock-ins are beneficial because they prevent you from withdrawing prematurely and give you time for compounding.

When you choose PPF, you'll lock in your funds for 15 years. On the other hand, you'll have to wait until you turn 60 to access funds invested in the NPS. While you can withdraw money from PPF, it is essential to have the discipline to wait for the said years before withdrawing from it unless necessary.

If you invest in NPS, you can withdraw 60% of the corpus when you turn 60 and then use the remainder to purchase a pension plan. You may also invest in a ULIP to get insurance and investment benefits, as well as a five years lock-in. However, to get the most out of a ULIP, you should invest in it for more than five years.
 

4. Invest in Equities

While equities are volatile, you can get returns from them in the long run. However, you cannot achieve that by panicking and selling them whenever there is a short-term market fluctuation. Most investors stick to investments for extended durations because of the hope of earning inflation-adjusted returns from their equities. They also get a reward for that.

For example, most investors remained committed to their investments when the pandemic hit and remained hopeful that things would change in the future. Later, the markets recovered, and the investors' perseverance paid off. They got good returns and enjoyed the benefit of their patience.
 

5. Avoid Following Everything You Hear and Read

You will get different views and opinions from the media and others concerning the market, especially when things seem not going well. If you want to succeed at long-term investing, you should ignore following the noises because they might be distractions to stop you from achieving your goals.

In such a case, it would be best to consult a financial expert to guide you on the best thing to do. Often, market noises make investors panic and make wrong investment decisions. Hence, avoid the market distractions and focus on your investment goals.
 

6. Diversify Your Investments

Financial experts recommend that you should not depend on one investment. Instead, diversify your investments across different areas such as bonds, equities, and other assets. If you choose to invest in equities, you can consider long-term, short-term and mid-term investments. Diversification enables you to stabilize your portfolio and balance the rewards and risks.

You need to review your investments to succeed at long-term investing periodically. That is because situations keep changing. Studying your assets will enable you to avoid what you don't need and change your investments depending on your goals. Investing in the right way can allow you to remain on the right path of financial freedom and, again, the multiple benefits from long-term investing.