Long-Term Investments
Involve holding assets for an extended period to earn higher returns potentially.
What Are Long-Term Investments?
Investing long-term is when an individual or company intends to hold assets for more than 1-3 years. When discussing assets, we mean stocks, bonds, real estate, or dividends from the stocks you hold. These examples can increase your maximum probability of earning income.
Investment strategies refer to long-term investments because they limit the risk of loss of profit over time. Long-term investments are designed to construct wealth over time in contrast to short-term investments that are solely focused on immediate gains involving more risk factors.
Knowledge and consistency are key determinants to driving successful investments. Before investing a percentage of your income, have a firm sense of why you want to invest because the risk-to-no-risk ratio should be slim; therefore, knowledge is key when it comes to investing.
Consider the factors that motivate you to invest. Do you like investing because you’d see a payout in the long term? Do the green or red numbers satisfy you and want to learn more? Does it feel like an addiction to reading charts and multiple stocks simultaneously?
These motivations will decide the future. Consider diversifying your portfolio with a mix of assets to help minimize your level of risk and increase your profitability for an increased margin.
A few examples of investing long-term include stocks, bonds, real estate, mutual funds, and retirement savings accounts such as 401(k)s and IRAs. Tax advantages, potential compound interest, and diversification are just a range of benefits for investing long-term rather than short-term.
Before beginning the journey, you must figure out where to start! Figuring out your financial status is commonly known to be the first step, but below are ways that could jumpstart your journey for long-term success.
Be cautious with the tips below as it may go your way or not, and also success can be measured in numerous ways. Therefore, this will motivate you to become financially successful.
Key takeaways
- Successful investments are driven by knowledge and consistency. Before investing, to contribute to success, you must have a firm sense of why you want to invest. Investing can be risky; therefore, knowledge is key.
- Consider diversifying your portfolio with a mix of assets to minimize risk.
- The earlier you start investing, the longer your investments appreciate.
- Financial advisors can guide customers through a process that helps them to allocate their assets and rebalance their portfolio over time to ensure the risk is minimized and investments remain aligned with their milestones.
- Choose a publicly traded company in a growing or emerging sector to see yearly gains.
Why should you start Long-Term Investments early?
The clock is ticking when it comes to asking “Why should I start early?”. Long-term holders wish they began earlier than they started.
Questions arise about long-term investing, such as:
- Where should I begin?
- Which broker should I sign up for?
- What are the benefits of investing long-term?
Most importantly, the commonly asked question is, where do I begin, or why is it important to start earlier than weeks, months, or years from now? Investors who have the opportunity to start early, have more time for their investments to appreciate compared to starting years later.
We are in an era where young adults are too busy in the ‘getting rich quick scheme’, but we must gravitate away from this. Investing long-term takes patience, and acquiring bonus skills will activate a mindset where failure becomes a stepping stone for overall success.
If long-term investing interests you, start by educating yourself with just the basics. To begin, research the different types of investments, what strategy works best specifically with stocks or exchange-traded funds (ETFs), and learn risk-to-reward ratios.
Note
After a basic understanding of the possible investment options available, it's recommended to consult with a financial advisor who will assist you in creating a long-term investment plan customized to your liking.
Strategic Long-Term Investing Goals
New players entering the game want to create and build a brighter, wealthier future. To have control of your financial destiny, you must take control of your finances, and if you have that handled, then you can live the life you’ve always dreamt about.
Below are just a few long-term investing goals you may want to consider:
1. Accumulating wealth for the future
Accumulating wealth for the future so you won’t have to work again. Investing long-term is to eventually accumulate sufficient wealth to cover living expenses without worrying about extreme costs after retirement.
Investing in high-quality stocks is expected to make significant returns year after year, but restrain yourself from withdrawing too soon and keep it invested.
2. Leveling your risk tolerance
Leveling your risk tolerance will determine your long-term outcome. When starting out, you must first consider the risk levels, and there are only three levels. You must consider low, medium, and high-risk levels when investing in the long term. Start thinking about if you want to pursue riskier stocks for increasing returns or less risky and stable investments.
3. Saving for retirement
Saving for retirement will save you from working after you’re 65. Investment in your retirement future at a young age is one of the smartest decisions you can make.
Note
Investing into a 401(k) or IRA will benefit from compound interest and potential employee contributions, and tax-free are completely safe, and only you would be able to touch it.
4. Education funds
Start envisioning future educational expenses, such as your children’s college tuition or preparing for school loans. Investing in high-quality stocks will generate significant returns for years to come, so you won’t have to worry about taking out unnecessary loans for college tuition.
5. Legacy planning
Investors invest in stocks to leave a legacy for future generations. Create a separate account in your IRA or 401(k) and label it as ‘legacy funds’ to navigate better.
Aim to create passive income after a couple of years of saving up and investing in the S&P 500 ETF Trust, which generates more than 10% a year and will also pay out dividends to customers. Find stocks with a high dividend yield percentage, such as AT&T with 6.02% or Ford Motor with 5.03%.
Selecting the Right Brokerage for Your Investments
Are you trading on a complicated trading platform with high fees? Do you want to finally take control of the steering wheel for your long-term investments without breaking the piggy bank? Look no further than Robinhood!
Signing up for a brokerage is possibly the smartest decision to make when starting out in your early adult years. Brokerages such as Robinhood or Webull will allow you to invest in selecting stocks, ETFs, and even 1-3 years out options.
But, do not worry about any expensive fees eating away at your profits. Therefore, these brokerages will allow you to build diversified portfolios that align with your goals.
Robinhood is a user-friendly app/website that promotes “Investing for Everyone” and is easy to understand once you get started with a free stock. To track your portfolio, Robinhood does a neat job where you can see your performance as soon as you open the app or website.
The convenience factor Robinhood brings compared to other brokerages allows you to manage your investments on the go, so making informed decisions can be made where you are. An option in Robinhood allows you to make automatic dividend reinvestment without lifting a finger.
Although Robinhood does not offer DOW JONES, NASDAQ, or S&P 500, it should be considered one of the top brokerages for beginners to understand the stock market better while having the ability to navigate through the calendar years.
I have a little more experience. What should I do now?
After spending time constantly researching and asking questions, you finally decide to step it up a level and want to join another brokerage. However, you ask yourself, what should I do now?
The next brokerage professionals recommended is Webull, a trading platform for active investors with more opportunities than Robinhood. With Webull, you have opportunities to use their technical tools to aid your long-term investments with access to drawing tools and more.
Another jewel in Webull’s crown is its advanced charting tools, providing traders with technical indicators, drawing tools, and real-time data. With tools at their fingertips, traders can detect long-term trends and make informed trading decisions with precision and speed.
Webull provides a community base for traders who share their insights or experiences and educational resources to help new or experienced long-term investors learn more about long-term investing. The community is valuable for new investors to build their knowledge and skills.
Diversifying Your Long-term Investments
When picking out stocks, start looking at all the stocks that interest you or the ones you know the most about. For example, Disney is a rising company sensation because of the introduction of Disney+ and exclusive shows with Marvel.
Investors need to do their due diligence, researching on their own for stocks that may involve risk, but if you feel uncertain, see a financial advisor to minimize risk.
A strategy for a reasonable long-term investment may involve diversifying your portfolio across different sectors to minimize risk. Public companies are motivated by their financial status, comparative advantage in their sector, and history of paying fair dividends.
The purpose of investing long-term is the belief that the company will grow significantly over time, such as emerging industries like renewable energy, technology, and healthcare companies.
Investing in ETFs
ETFs have gained immense popularity over the past decades due to advancing technology. It has been said to be the most effective way for investors to control their knowledge and capital better.
These offer diversification by including a bundle of companies from different sectors, such as healthcare, technology, financial services, and energy, to reach your investment goals.
This diversification reduces the risk associated with holding individual stocks or bonds, as the performance of any one security will have less impact on the overall portfolio.
ETFs offer flexibility for long-term holders. ETF investors are exposed to various assets, such as stocks, bonds, commodities, and currencies. With flexibility, investors can invest in specific ETFs that target certain sectors to support their portfolio requirements, goals, and risk tolerance.
A potential ETF investor with high-risk intentions may choose to invest in a particular ETF because they want to focus on emerging markets solely. Low-risk investors will choose a safer investment, such as the SPDR S&P 500, because of their stability of price and reputation.
The SPDR S&P 500 Trust ETF is the largest and oldest ETF in the world and is priced appropriately for new investors. This is known to be one of the safest investments because of its low maintenance and a greater average return on investment than other ETFs.
Note
This is not financial advice. Please see the risk involved when looking into these stocks, and please do your due diligence and research before buying and holding long-term investments.
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