7 Key Principles for Successful Long-Term Investing

1. Plan for a Long Life

The average human life expectancy has increased across the world in the last few years, thanks to the fast growing pace of science and technology in the healthcare sector. As per a latest survey, there are 51% chances that an individual will survive for at least 90 years!

It means that if you are planning your retirement as a part of long-term investment, you need to start early and invest more to enjoy your retirement corpus throughout your life. Any surplus corpus can be used by your family or dependents but any shortfall in the corpus in your retirement days can be very disturbing. Therefore, it is very important to plan your investment for a longer life expectancy.

2. Cash Doesn’t Always Wins

It is a very common myth with people that cash can be a safe haven during those hard times. Interest rates are expected to stay low for long periods and thus an investor should make sure that any cash allocation should not undermine the objective of long-term investment.

As per a survey, more that AUD500 billion is sitting on the sidelines and earning a very low interest rate. If the same would haver been invested in potential instruments, the performance could have been impressive over the long term.

3. Keep Your Emotions Out of Investment:

Having a disciplined investment plan can be very helpful for your investments. Human emotions can severely impact your decision-making process and thus it is very important to keep them out of your investment plans.

Human emotions have a variable nature depending on the market volatility, which can lead to disastrous results. TechnIQ offers a system-based trade signal service which takes human emptions out of the decision-making process. It is a back tested analytical platform which provides quantitative trading strategies. With the help of TechnIQ, only 5 minutes is all you need for planning your weekly trades.

4. Compounding is “MAGIC”

You must have heard about the seven wonders of the world. But very less people know about the eighth, well the eighth wonder of the world is compounding. It is so powerful that starting a few years late or missing out a few years on your investment can actually make enormous difference to the eventual returns. Investing 5000 INR by the age of 25 annually in any instrument that grows by just 5% year on year will leave you with over 2.5 lakhs more by the age of 65, compared to what you will get if you start at 35.

Compounding works phenomenal if you reinvest all the income from your investments to further boost your portfolio. Reinvesting your income again and again can turn bring enormous difference to your corpus. That is why we say that compounding is magical.

5. Don’t be Afraid of Volatility

There can be rough patches as a part of your investment journey. It is next to impossible to predict those hard times of pull backs. As an investor, it is very important to be mentally prepared for those.

Markets can go bearish in a moment, but as an investor, it is important to expect the same. There should always be a plan B for those times when the going gets tough. Despite all the pull backs in the past years, the financial markets have always recovered to deliver positive returns after few years.

The correction phase of the market is rather an opportunity for bottom fishing, and not the point for selling.

6. Stay Invested

Market timing is a very dangerous habit. It is next to impossible to predict pull backs and correction phases of market, but you must have heard that every cloud has a silver lining, and thus strong returns often follow every correction phase. However, the common human emotions of fear and greed can push the investor to opt for decisions which are later regretted.

Even missing out the market for just a handful of days can have satiating effect on the total returns of an investor. Even if the value of your portfolio starts bleeding, it is very important to stay invested and not let your emotions take control over your decision making.

7. Stay Diversified

The last few months have been a tumultuous ride for almost every investor. The markets have experienced all right from natural disasters to geopolitical conflicts and deadly pandemics. Volatility is a very normal constituent of investing. For minimizing all such risks, diversification can help the investors.

A portfolio including diversified investment instruments from different categories is expected to sustain such events without turning upside down.

As an investor you may have different investment objectives and different investment strategies, but the bottom line of extracting profits remains the same. While the above listed principles can help you for a successful long-term investing, it is important to understand that financial markets are full of risk and it is not necessary that the value of your portfolio will always appreciate.