Healthier lifestyles and medical developments mean that many of us can expect to enjoy lengthier lives than previous generations. However, this creates a significant challenge, to fund a fulfilling life beyond our working years. In this article we look at how to invest for the long term.
Invest for the Long Term if you Expect a Long Life
Projections from the Organisation for Economic Co-operation and Development (OECD) suggest that the average man will live to 83.5 by 2052. A woman can expect to live to 87.2 years old.
So how can investors protect themselves and keep their long-term goals on track?
Mark O’Neill, Director at Jones Harris Chartered Financial Planners gives some points to consider when planning your investments long term.
Have a goal, a timeframe and a plan when you invest for the long term
In order to make plans for the future, you need to know where you are today and where you want to be in the future.
Wealth goal-setting needs a starting point and ending point. The time frame for reaching your goals. Plus the estimated cost involved.
It’s important to consider and plan for which wealth goals really matter most. Instead, many people muddle through their financial lives meeting the day-to-day expenses that dominate their attention. That’s why to get what you want most, you must decide which wealth goals will take precedence. Work toward the lesser goals only after the really important ones are well provided for.
Think ‘compounding’ when you invest for the long term
The earlier you start saving, the easier it becomes to achieve your long term wealth goals.
One of the biggest advantages of a long-term investing approach is that it gives you more time to benefit from compounding. This is when you get returns on your returns, as well as your original investment.
Avoid over-reacting to the latest news
Every day, someone will have something new to say about the financial markets. Unpredictability in financial markets is normal, and investors should be prepared for the ups and downs of investing rather than reacting emotionally when the going gets tough. The lesson is; don’t panic.
Knee jerk reactions, without due consideration can be bad for your portfolio and your peace of mind.
Cash may not be King when you invest for the long term
Some investors think of cash as a safe haven in unstable times.
With interest rates seemingly staying at low levels ever since the financial crash, returns on cash deposits are negligible.
As interest rates are expected to remain low, investors should be sure an allocation to cash does not undermine their long term investment objectives.
Cash has a place in everyone’s portfolio. But, it should form part of that portfolio, not control it. As long as you are prepared to think long-term, there are alternatives. Some of which are not as risky as you may think.
Make changes to your investment when you need to
Over the years, what you need from your investments is likely to change. For example, if you’re getting close to retirement, you may want to reduce the level of risk in your portfolio, as there’s less time to recover from any market falls. Changes like these are an essential part of investing – but the key point to remember is that they are based on your needs, not what’s happening elsewhere.
As with all financial planning, professional advice should be sought.
Contact Mark O’Neill at Jones Harris Chartered Financial Planning on: 01253 874255 or email: firstname.lastname@example.org.
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