Planning for long-term goals whether it is purchasing a house, children’s education/marriage or saving up for retirement is not a short process. It requires looking at investments from a long-term perspective and picking the right approach.
Given below are 5 key principles of long-term investing which you should keep in mind:
1. Your investments should harmonize with your monetary objectives:
Long-term goals can be achieved successfully only with the help of correct investment options. One needs to understand his or her aims, duration for attaining them and the risk appetite. People who prefer low risk choose fixed deposits, bonds whereas those who can take higher risk opt for equities. Figure out different investments in detail and decide which one fulfills your long-term aims fittingly.
2. Don’t forget the mantra of ‘diversification :
This principle has been often emphasized by financial mentors since it is of great significance in realizing any kind of financial goals. When you invest all your funds into the same investments, the risk is highly increased as any kind of downfall can have a huge impact on returns. Diversify your portfolio by investing money across various asset classes to balance your risk.
3. Refrain from taking hasty decisions:
Making adjustments in your investment portfolio centred on short-term market activity can produce disastrous results and affect your long-term goals. The performance of your investments will be influenced by happenings in the financial markets taking place in the future and not in the past. Stick to your chosen investment strategy and be patient.
4. Have rational expectations from market performance:
Instability in markets occurs due to various social, pecuniary, and political factors. Be prepared for some ups and downs which can take place. Generally, uncertain events can lead to market collapse. However, as conditions slowly return to normal, markets also become stable and offer profitable returns.
5. Review your progress periodically:
Creating an investment portfolio with the correct mix is not enough to attain your long-term goals. You must keep a regular tab on your investments and make necessary changes in line with market swings. Moreover, you can seek the advice of an expert financial advisor who can help you monitor growth of each investment and modify them according to your desired asset allocation.