Long-term investment is a mindset of both consistency and restraint to not follow norms and react to bad and often times, the “it feels too good to be true news”. As far as thinking about how you invest, Warren Buffet, who some say is the goat of investing has always given advice about how the average American should invest. Before we get into long-term investment tips, here’s reminder of the few things he’s said:
“Even when there’s a stock sell-off, as there was in 2020, ‘the average person’ should stick to this investing strategy”, according to Warren Buffett.
The pandemic has scared us all to rethink our careers, how we live, and our family; in early 2020 when the market saw huge declines in March, it was a point people were selling their assets. When the market can go from green to red, it’s important to know that you’re investing in the long-term and not be too worried about the day, week, or month changes. Think in a few years to decades.
“In my view, for most people, the best thing to do is to own the S&P 500 index fund.” according to Warren Buffett.
Index funds are more macro than any individual stock, particularly one that invests in the 500 largest companies in the United States which include some of the big companies we know and love today, Google, Apple, Amazon, Telsa. S&P 500 index funds also allows you to ignore the chatter that changes in media outlets every day. It’s worth watching what goes on day-to-day or week-to-week, but don’t let that dictate your investment decisions.
“Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.” according to Warren Buffett.
To build on #2, the 3rd thing Warren understand what generally beat most individual stock pickers and beat the general average. We’re in an age where we can easily invest in broader investments that are automatically managed so fees are cheaper.
Now that we’re leverage the sage of Stock investment advice, and we have the basics down, here are some great tips to use as guidelines to long-term investing:
4 tips THAt will help you develop Good investment habits:
Start as soon as you can.
Time is your friend for investing. This is due to compound interest where your returns on your money generate even more returns. The longer you keep it in, the more it will grow.
Even investing small amounts are a consistent and regular period of time, helps you build wealth throughout your life. It allows you to not have to worry about the high points and low points and just put money in areas you believe in, like the S&P 500 or companies you know will be around for a long time. It’s hard to predict the market and this is a sure way to not have to predict.
Make it automatic.
If you know how much disposable income you have, the extra money that you can save or invest after paying your monthly bills, then automatically investing in from your paycheck or from your bank account is a sure way to be consistent in the long-term. Companies have made it easy with 401k match to send a consistent portion of your paycheck to your non-taxable retirement accounts, and you can potentially do the same for your individual taxable investment accounts. It’s just one less thing to worry about.
Reinvest your dividends.
If it’s about growth, and you have a long time horizon until retirement, it might be best to reinvest your dividends that some public companies pay out to you quarterly or annually. This goes back to the part of compound interest, the more money you have in your pot, the more it will grow. Interest will compound on top of what you’ve added / contributed, as well as the extra dividend money you received. This will help your portfolio grow faster over time, especially in the next 20-40 years depending on where you are in your investment journey.
Stay the course.
Because it’s hard to predict the market, it’s best not to be scared of a string of losses or declines in the market. Especially what’s happening now in Sept 2021 as the economy and delta variant puts a hazy cloud in the future. These drops in prices or suggestions that an upcoming corrections of 10% will happen as media suggests. Don’t react to the market where people try to sell off when things low. The same goes with big pulls in trends, where news outlets rave about the latest spikes from investments.
As a long term investor, if you stick with your investment strategy and the 4 tips above, you’ll surely have a good nest egg for when you really do need it 10+ or 30 years from now.
Keep in mind, investments especially in the stock market always presents risk – but being calm and having a long term investment strategy using only the disposable income you have will allow you to meet your goals.