5 Tips for Long Term Investing

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You don’t need a master’s degree in finance to start investing if you want to have more money after retirement or have another long-term goal.

But in order to manage your money, you can not rely only on your luck as a beginner in the field. You will need to learn and implement basic investment strategies.

Following these strategies will help you meet your goals – buying your own home, a new car, education abroad for children, retiring with serious savings, and why not becoming a millionaire.

Tip no. 1: Start investing early

When it comes to investing, time is your friend. When should we start investing? The answer to this question is – as early as possible, opinion shared by the world`s top investors.

The longer you invest money, the more time they will have to increase. The power of investing is that you earn interest on the interest you accrued over your initial investment. This is the compound interest (accrual interest), which according to Warren Buffet is the eighth wonder of the world, but also the greatest power in the universe.

The calculations made by the Fed easily show the strength of compound interest. A 25-year-old investor who invests 5,000$ per year in the first 10 years and receives an 8% annual return (ed. is the average return on the historical plan for US indices) will have $787,180 at his disposal at the age of 65.

For comparison – an investor who starts investing 10 years later, or at the age of 35 and spends $5,000 per year for the next 30 years, will be able to have $611,730 at retirement.

The snowball effect – the longer you invest, the more you earn.

Tip no. 2: Higher risk = higher return

There is a big difference between saving and investing. Investments make people take more risks in order to ensure better returns.

The largest US companies, for example, have provided 10% of the average annual accumulated return for the last 93 years until the end of 2018, according to Morningstar. 20-year government bonds carry 5.5%, while 30-year government securities – about 3.3 percent.

If during these 93 years you have invested 1$ in shares, today you will have 7,030$.

Investing in the capital markets always brings better returns than cash or deposits.

Tip no. 3: Investing is a simple process

Yes, it is likely that you do not know which stocks, commodities, or funds to target. But why bother? There are enough management companies on the market that can do this process  for you.

The only question you will have to think about is how much money I will be able to contribute to the fund on a monthly basis. Set a goal – for example, by 2040 or 2050 and do not monitor the markets on a daily basis. The investment must be long-term in order to avoid short-term declines and rises, but in the end you have to have much more at your disposal than originally invested.

Tip no. 4: Diversification

Even Warren Buffett says we shouldn’t put all our eggs in one basket. That is why you can choose two or even more funds in which to invest your money. You can even make additional payments with automatic transfers, as long as you have such an opportunity every month.

Tip no. 5: Save

Save at least 10-15% of your income to invest. This will be of great benefit to you, because the additional contributions made will start to work for you over the years.

Contact Reece Arcon

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