The Core of Successful Long-Term Investing
Successful long-term equity investing hinges on a focused approach—prioritising what we can control and what truly matters. This means aligning our investment strategies with our financial plans rather than getting distracted by economic forecasts or market fluctuations.
Uncertainty is a constant; we can’t change this. Instead, we should concentrate on maintaining our investment plans, as we have full control over this aspect.
Whilst markets have been strong, it was not long ago we were experiencing significant geopolitical changes, highlighted by the conflict in Ukraine and ongoing supply chain disruptions from offshoring to Asia. We came off record low inflation rates to the highest inflation rates in 40 years. The outcomes of these situations were unpredictable, yet this uncertainty is largely irrelevant to a long-term, goal-oriented investor.
The essence of successful long-term equity investing is the commitment to rationality amid uncertainty. This means grounding our investment policy in our financial plan rather than external events.
Four years ago, the full impact of the pandemic was unimaginable, and the timeline for vaccine availability was uncertain. Today, we face new unknowns, yet the reality is our clients’ retirement goals are approaching, and the amount needed to save has likely increased due to inflation. Their best chance for a secure retirement lies in the robust returns from well-managed companies, whose short-term price fluctuations are unpredictable.
What we can reliably know is great companies are adapting to the current challenges.
The key to your investment strategy is action over reaction: focus on your plan and continue your contributions, staying grounded in historical perspectives rather than current headlines.
It’s about time in the market, not timing the market.
We understand optimism can seem unfounded on tough days, while pessimism may appear wise. However, our voice of long-term optimism is essential, and we want to ensure you hear it today.
Key Takeaways:
Minimize Noise: Limit exposure to news that makes you uneasy. Headlines aim to grab your attention, not guide your investment strategy.
Stick to Your Plan: Your investment strategy is crafted to help you achieve your life goals. If your goals remain unchanged, your strategy likely doesn’t need adjusting.
Focus on Fundamentals: While history doesn't repeat, it often rhymes. Compare real returns from growth assets like shares against those from cash and bonds.
Price vs. Value: When asset prices drop, the investment value increases. Continuing contributions during market downturns can provide better value.
Embrace Optimism: Believing in the future is crucial. This mindset is tested during market corrections and can significantly influence your outcomes.
If you have concerns about your investment strategy or would like to discuss an investment strategy for your future, please speak to one of our Financial Advisers.