Embracing and optimising the three can lead to successful wealth accumulation and financial security over time.
Those who are invested for the long-term can expect to enjoy a smoother, less emotional ride provided they can keep their emotions in check – largely because knowing that you’re invested for the long-term helps one to ride out market fluctuations that are endemic to the environment.
From our experience, investors who monitor every market fluctuation and try to time their investments generally achieve poor investment outcomes. While intuitively, many investors understand the value of remaining invested, emotions often win the day – but lose the win. As a long-term investor, time is one of your greatest allies because the longer you remain invested, the longer your money has to grow as a result of the exponential effects of compounding. Further, taking a long-term view gives you more opportunity to reinvest your profits, which in turn increases your potential for further profit, and so it goes on.
Avoiding knee-jerk reactions to short-term market fluctuations is made easier by having a clear set of pre-determined financial goals in place – as focusing on one’s goals can help filter out the short-term noise. That said, when constructing your investment portfolio, be sure to identify a realistic time horizon for each goal and ensure that your portfolio is aligned with that time frame.
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