5 Strategies for Long-Term Investors
by Michael Morey
Financial Advisor, RJFS
“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”
Warren Buffett is known as the “Oracle of Omaha,” and is also one of the most quoted men on the planet thanks to his successful investing habits. Part of Buffet’s successful investment legacy can be directly attributed to his long-term approach to the market, as the quote above references.
Investors Who Stay Invested Tend to be Rewarded
History has shown that investing in the stock market can be volatile; investors can lose money over short periods of time, month to month, or even year to year. And while there is no guarantee of future returns, history also shows that over longer periods of time, investors who stay invested tend to be rewarded for their patience as stocks tend to outperform the returns of bonds and cash over the long-term. Unfortunately, investing your hard-earned money is an emotional process, and the average investor tends to make emotionally driven decisions at the worst possible times.
To help you avoid costly mistakes, here are five helpful strategies to keep in mind as a long-term investor:
1. Align Your Objectives and Time Horizon »
Before investing, it is important to define what your objectives are as well as what your time horizon is. Knowing what you want your money to do for you - and when - will go a long way to helping you choose appropriate investments that align with your objectives. Determining your time horizon, or having an idea of when you might need to use this money will also help you to determine the amount of risk you can afford to take.
2. Evaluate Risk Tolerance »
When it comes to risk tolerance, no two investors are alike. It is important to be comfortable with the amount of risk you are taking. Historically, investors with longer time horizons can typically afford to take on more risk than those with shorter time horizons. For example, a 25-year old investor with 40 years until retirement can typically assume more investment risk than a 64-year old that is a year away from retirement, depending on his or her investments for income during retirement.
It is important to remember that (1) being able to afford to take on more risk and (2) being comfortable with taking on more risk are not the same. Each investor needs to determine how much risk they are comfortable with in their investments, regardless of their age or time horizon. Keep in mind that your time horizons may change, and so too, may your risk tolerance. ALWAYS remember that there is no such thing as a risk-free investment.
3. Diversify, Diversify, Diversify »
You may be familiar with the term “diversify,” but unfortunately there’s no crystal ball that can predict how well a company will perform from one year to the next. Diversification has historically helped to reduce volatility within portfolios because it minimizes the reliance on one single stock or investment to perform well in order to achieve success.
Along with diversification, it is also important to rebalance your portfolio from time to time. Over time, an investment can grow to become a large piece of the portfolio, which is great! However, as previously mentioned, none of us owns a crystal ball that can predict which investment will perform well from one year to the next. Rebalancing helps to reduce any large concentrated position, and redistribute the assets throughout the rest of the portfolio to hopefully reduce volatility.
4. Review Your Portfolio at Least Annually »
Over time, things can change including your investment objectives, time horizon and perhaps risk tolerance, to name a few. This is why it is important to review your portfolio at least annually to ensure that your investments are still in line with your investor profile. As financial advisors, we would caution you to not check your portfolio too often or worse yet, every single day. As mentioned previously, the stock market can tend to be volatile and oftentimes investors who monitor their portfolio too frequently tend to make knee-jerk decisions based upon short-term market fluctuations. Impulsive decisions can tend to be costly and have a negative impact on the long-term performance of your portfolio. Remember, it is time IN the market—not timing the market—that gives you the best possible chance for success.
5. Enlist the Help and Resources of a Qualified Financial Advisor »
May individuals simply don’t have the time, energy or resources to give their investment portfolio the attention it deserves. Utilizing a financial advisor not only takes advantage of the experience and resources at their disposal, but it can also help to take the emotion out of the decision-making process and thus help to avoid costly mistakes.
At Morey & Quinn Wealth Partners, our team of qualified financial advisors can help you develop a long-term investor profile. As your partner in financial planning, together we can construct a long-term strategy that is appropriate and tailored just for you.
Financial-Planning Resources for Confidence to Stay the Course
Working with a financial advisor can also help eliminate a lot of the “noise” that bombards us in today’s 24 hour news cycle. Your Morey & Quinn financial planner can help keep you informed of the information and news that’s most relevant for your financial well-being, while tempering the emotional swings driven by daily headlines.
If you would like to develop a long-term financial strategy or review a strategy you already have in place, contact an advisor at Morey and Quinn Wealth Partners today at 402.502.9900. Our financial professionals value the chance to create unique, successful client experiences. We look forward to working collaboratively for your well planned life.
Morey & Quinn Wealth Partners
Raymond James® LIFE WELL PLANNED.
Toll Free: 877.541.6593
11225 Davenport St, Suite 109 Omaha, NE 68154
Any opinions are those of Michael Morey, and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
Past performance is not indicative of future results. Diversification does not ensure a profit or guarantee against a loss. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability.
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