YO U R I N V E S T I N G
The Long Game Investing isn’t about instant rewards. You should have a long-term horizon, says Mike Taylor of Pie Funds. He explains why.
So, you want to be a successful share market investor? There are a few key things you should do. The most obvious ones are diversifying your portfolio and doing some research. But I believe taking a long-term approach to your investing is one of the most important. When people invest, they often want instant results. Why? With property, many of us are happy to buy and hold properties for years, even decades, and ride out market highs and lows. Investing in other asset classes should be no different. But taking a long-term approach to your investing can be easier said than done. So, how do you do it? Choose your strategy An ‘investment strategy’ is a plan to help you reach your goals. Everyone’s strategy will be different and based on how long you have before you’ll need the money, your risk tolerance, goals, and financial situation. For most people, investing is for the long term. Sure, there are some people who are traders, which means they buy and sell assets like shares or properties often. But most people will be investing for at least a few years. A financial adviser can help you work out the right investment strategy for you. Once you’ve got a strategy, stick to it. Review it from time to time or when your circumstances change.
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Diversification and risk Investing for the long term helps reduce your risk. That’s because over short periods, markets can go up and down. But over the long term, your investment returns are likely to be positive. After all, that’s why people invest – to make returns. Investing for the long term allows your investments time to recover if the market falls in the short term. Diversifying your portfolio for long-term investment can also help reduce your risk. Setting up your portfolio to cover a range of asset classes, regions and sectors might form part of your strategy. The hope is that, by diversifying, if the market dips, not every investment will fall in value. Some will perform better at different times, and over the long term these returns should average out. ‘Dollar-cost averaging’, which is effectively drip-feeding money regularly into an investment over a long period, also can help reduce your risk. Manage your emotions When you can manage your emotions, longterm investing becomes much easier and much more effective.
investing. We saw this during the large market dip in early 2020 due to Covid-19. Many KiwiSaver investors saw their balances drop significantly, and panicked and changed to more conservative funds, with some locking in large losses. Markets usually recover over the long term, so try to stick to your strategy, and avoid checking your investments too regularly.
It’s not healthy to panic or worry about your investments, and it can make investing stressful.
Do your research How a fund has performed in the past doesn’t guarantee its future performance. But long-term performance can give you some helpful insights when you’re selecting where to invest your money.
For many people, managing their emotions can be one of the hardest things about
There are two ways to research and assess an investment fund before investing:
