How to build wealth that stands the test of time
Long-term investments tend to be less risky in the end. By investing for the long term, you are committing to your investments, and history has shown that this strategy can pay off handsomely.
This is also often the best way to build wealth that stands the test of time. It’s how you plan for retirement and build a legacy to pass on to your children and grandchildren. But it’s important to keep your eye on long-term goals like retiring, paying for your child’s education and passing on some of your wealth to your family.
Regular saving as part of a long-term investment strategy offers a flexible, affordable solution for many people. And by keeping some of your wealth liquid in the form of cash deposits or short-term government securities, you should not be forced into realising investments at what might be an unfavourable time.
Long-term investment points to consider
1. Don’t disregard income
Investment is about more than capital growth. For your money to really grow, dividend income is key. The main benefit of reinvesting income from your investments is that it can be used to buy more shares or units within funds which have the potential to grow in value and boost your overall returns. Reinvesting income is essential to grow your portfolio. You will usually have the option of reinvesting all or a portion of your proceeds back into your original investments.
2. Take some risk
All investments involve some degree of risk. Differences include: how readily you can get your money when you need it, how fast your money will grow, and how safe your money will be. Risk isn’t always a bad thing, especially if you are looking for long-term rewards. Understanding risk means identifying your own attitude towards it and identifying the different types of risk. Rebalancing can also help to maintain the overall risk of a portfolio in line with your needs.
3. Balance change and constancy
Chasing trends at the expense of stability is not wise. The feeling that you’re missing out on a great performance can be very strong. Contrary to what the media may portray, you can do well – and reach your long-term investment goals – with a diversified approach that doesn’t require you to discover the latest investment fad. Resist this approach. The smart money has probably already moved on.
4. Don’t put all of your eggs in one basket
Diversification is key for successful long-term investing. Spreading your assets while focussing on long-term returns is generally a recipe for stock market success in any economic environment. It is not a case of investing large sums of money in one go, but investing wisely and consistently.
5. Invest regularly
Putting money into the stock market at regular intervals allows you to ride out stock market volatility. Drip-feeding money is the perfect solution if you want to invest but are unsure of when to do it, and it removes the uncertainty of putting a large sum of money into the market all at once. Remember, it is the time in the market that is by far the most important consideration, not any attempts at timing the market – a strategy fraught with danger.
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE. THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.