During turbulent times in the economy, the money you have been saving for a long time can face a serious chance of losing its value at alarming rates. In times like these, long-term investing as a strategy can offer to weather the effects of short-term movements in the market.
With the right investment strategy in place and a smart plan for allocation of your assets, you can not only beat inflation but also safely make it through financial and economic shocks or other short-term issues with your personal finances still doing their job for you.
Tapping into professional advice when it comes to investment decisions is the best course of action, especially if you are new to long-term investing. Ridgewood Investments is dedicated to helping you every step of the way.
Defining Long-Term Investments
Long-term investing is a strategy that prioritizes long-term rewards over potential short-term volatility and gains. Long-term investments are investments that are held for at least several years and preferably for more than three years (ideally for a decade or more). For taxes, of course, you must hold at least one year for the sale to enjoy lower long-term capital gains taxes.
All assets are susceptible to risk, and stocks are particularly susceptible to price volatility—that is, price swings. There is no assurance that individual stock prices will increase again after a decline and if you are pressured to sell too soon, a later price rebound may not help you.
Long-term investments are more likely to have advantages if you invest in a properly diversified portfolio and hold on to those quality investments for a sufficiently long time. These investments can include real estate, stocks, business investments, and much more. Of course, it is almost impossible to hold investments without basing your investments on knowledge.
The Benefits of Long-Term Investing
The best potential for value growth for your money is through long-term investing. But to do this, one must remain composed when there is a lot of stock market turbulence keeping in mind that, historically speaking, markets usually recover if you avoid serious mistakes.
- Time In the Market Is Important
The traditional saying in investing holds that the key to returns is time in the market, not timing the market. You run the danger of losing out on the market’s greatest days if you get scared or cash out of your assets.
Over the years, the global economy has faced hardships, but the stock market has, over time, kept rising. During times of stock market turbulence, an experienced advisor can serve as a sounding board and guide you to assemble a quality portfolio and stay focused on your long-term investment results.
- You Can Successfully Beat Inflation
Over time, inflation is almost guaranteed to reduce the actual value of money. This is increasingly becoming a reality, with prices growing at an alarming rate – nearing 10% in 2022.
Given how quickly the market can decline, short-term investing can significantly increase risk, and holding cash for long periods of time can mean losing up to half of its initial value in just a decade of inaction.
Employing the help of a financial advisor to determine the most successful long-term investing strategy may be the smartest move you can make to position yourself to prosper.
As long-term investors, your money has the best chance of increasing and outpacing inflation over the long term if you are willing to be patient with investing and stick to quality businesses that offer the opportunity to outpace inflation by a significant margin
- It Helps with Risk Management
Spreading your funds throughout several uncorrelated investments, such as stocks, bonds, private assets, and cash, can assist to lessen the effect of volatility on the overall performance of your assets as a long-term investor. This is, in part, due to the fact that different assets may have a negative correlation, meaning they frequently do not respond to unexpected economic shocks in the same way.
Risk is inevitable when it comes to investing – after all, past performance is not an indicator of future results. A financial advisor can assist you in creating a diverse investment portfolio that meets your unique needs and level of risk tolerance.
- You Can Benefit From Compound Returns
The compound return is the rate of return that depicts the cumulative impact that a string of gains or losses has on an initial quantity of capital over time. It is typically stated as a percentage.
The annual rates at which assets have compounded through time are what is indicated by the reported percentage of compound returns, which is how they are typically expressed.
Any profits made are reinvested every year, which means that over time, your money could increase even more. In light of this, establishing a long-term plan may enable you to take advantage of the miracles of compound interest.
- It’s Beginner-Friendly
To stay involved over the long term, you don’t need to have exceptional trading abilities or sophisticated financial knowledge; the primary thing you need is patience and a plan in place. This will help you maximize your earnings in the long term.
In light of this, establishing a long-term plan may enable you to take advantage of the benefits of compound returns. Moreover, with the right financial professionals by your side, long-term investing becomes that much easier.
- It’s Less Emotional
When your finances come into play, you should be inclined to listen to your head rather than your emotions when making investment decisions. It may be beneficial to take a step back and evaluate the situation before making any judgments if you are prone to abandoning a mission at the first sign of trouble in the market.
When the market dips, being focused on your long-term objectives may help you avoid making emotional judgments that are irrational.
Start Investing With Professional Guidance
Making the correct investing decisions and putting a long-term investment strategy in place is the smartest move for volatile financial times such as the ones we are experiencing now.
With professionals on your side, such as our team of financial advisors at Ridgewood Investments, managing your assets becomes a lot more stress-free.
If you’re ready to become a long-term investor and make better investment decisions, contact us, and let’s figure out the best strategy for you!