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Principles Of Long-Term Investment Strategy

If you’re thinking about paying off your goals seven years or more in the future, you need to save and invest now. Consider these five key ways to help you achieve your long-term investment goals.

1. Match your investment to your goals

Know your goals, your time frame for achieving them, and how much risk you are willing to take as an investor. Most investments fall into one of five asset classes, from “conservative” to “dangerous”. Cash equivalents (including money market funds, US Treasury invoices, money market certificates (CDs)) are in a more conservative range, and stocks (stocks) are on the higher risk side. Generally half-hearted are guaranteed investments (fixed-rate products backed by the issuer’s ability to pay for insurance), fixed-income investments (fixed-income bonds and funds), and real estate.

 

2. Spread the “eggs” in several baskets

Maintaining savings with similar investments can jeopardize money and lose potential profits. Consider diversifying your savings or diversifying across multiple asset classes. In addition to investing across asset classes, you can diversify by investing in several subcategories within the asset class. Keep in mind that there is no guarantee that asset allocation will reduce risk or increase returns.

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3. Don’t try to time the market

Market timing is when you want to get a high performance and move funds in and out of the stock to avoid lows. This is very dangerous and even the most experienced investor will stumble upon it. If you sell your stock during a down period, you may lose profits if the price goes up again. Keep in mind that historically, the stock market has recovered from widespread slumps, although past performance does not guarantee future results.

 

4. Make a purchase plan and follow

The dollar cost averaging method invests a certain amount of money at regular intervals regardless of market fluctuations. The dollar cost averaging method is very useful for long term investment strategies. If you invest in something when its price drops, you will get more investment units for your money, which can lower your average cost per unit. In addition, the lower the investment cost, the greater the potential return.

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If you regularly donate to your savings and investment accounts, such as your retirement savings account at work, you are using the dollar cost averaging method. The dollar cost averaging method cannot guarantee a profit or protect you from the risk of loss. This includes continuing investment in securities, regardless of fluctuations in the price level of the securities. As an investor, consider your financial ability to continue to participate in the dollar cost averaging method during periods of low price levels.

 

5. Monitor progress

Review your portfolio at least once a year. Over time, market fluctuations can upset the balance of asset allocation. When this happens, you can move funds between investments to align your portfolio with the required asset allocation.

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It’s also important to rethink your asset allocation as your life changes. For example, if you raise your salary, get married, have a baby, or get a divorce. You may decide to take less or more risk with your investment.

 

Whenever you check your asset allocation, ensure that your portfolio remains sufficiently diversified to maintain a comfortable level of risk for both short-term and long-term investments. Diversification helps reduce risk, but there is no guarantee that it will protect you from losing income.

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