January 28, 2023

The Smartest Strategy for Long-Term Investing

By DENNIS BLACK on Jan 4, 2023

A good investor seeks to build a heritage to have security and tranquility in the future. When deciding to invest for the long term, this type of investment becomes an important ally for this objective to be achieved.

In this article, I'll cover the best strategy for smart long-term investing.'

The Fundamental Mistake When Investing for the Long Term

I receive many messages from people who decided to make an investment with an eye on the distant future, for example, focused on retirement. However, because it is a long-term goal, they believe that they do not need to pay more attention to it.

There is an error of concept in relation to what, in fact, is investing in the long term. This false conception leads the investor to neglect details that jeopardize the construction of his patrimony.

When you have distant goals, naturally, you should follow recommendations and analyzes that indicate options with long-term prospects for success. However, as I always say, good investments today are not synonymous with great returns tomorrow.

Avoid Paralysis in Your Investments

Therefore, it is essential to avoid paralysis in the investment you have chosen. Unlike short-term investing, long-term investing is much more about following big trends, looking from afar, and ignoring momentary turmoil.

However, this does not mean leaving it aside, on the contrary. Unfortunately, that's not quite what I see when I talk to people who decide to invest for the long term.

Often, they neglect these investments due to the false tranquility they have about them. For example, many families have properties purchased by parents and grandparents at a time when this investment was considered “fail-safe”. Consequently, they continue to maintain them throughout life, despite being often responsible for losses and headaches.

This paralysis is also quite common among people who do not necessarily have this tranquility, but who avoid doing something simply because they do not know how to invest. This is a consequence of a way of investing that is much more complex than the very ability to manage that investment.

How to Change This Behavior?

It is possible to change this behavior and, often, the solution is to take a step back that provides more tranquility and security.

It may be that, at this point, it is worth exchanging the stock operation for stock investment funds. It may be that selling a store you have in a commercial point and buying small residential properties, or investing in real estate funds, is the best solution.

The most important thing, both for one profile and for the other, is not to neglect. Try to dedicate yourself to reviewing your strategy at least once a year. Try to refine your choices, replace poorly performing assets with better ones, and periodically rebalance your portfolio.

Long-Term Assets for Short-Term Goals

You can also use a strategy involving long-term assets to achieve short-term goals. However, letting go of the goal to be achieved is essential for it to be successfully achieved.

Let's say you have plans to take a trip two years from now, for example. However, the money you can save is not enough. So, you do some calculations and come to the conclusion that higher profitability can make the project viable. Therefore, you will assume a greater degree of risk in your investment portfolio.

In this way, you build a portfolio based on a balanced investment portfolio strategy. An example of a balanced portfolio is to establish a composition of 50% in fixed income and 50% in variable income.

If the plan works, you achieve the goal within the desired time frame. If, for some reason, the economic scenario was not interesting to realize your profits and did not bring the performance you would like, you can postpone the dream of this trip and extend the term of the investments to make your project viable. Maybe it doesn't happen in the timeframe you'd like (two years, for example), but within an acceptable timeframe of three, or four years.

Conclusion

Investing for the long term is a continuous process of learning and an opportunity to make better choices. Giving due attention to this is what will make the difference in achieving the future you want for yourself and your family, especially in the long run.