Investing in Stocks & Shares is often far more profitable when carried out as part of a long-term strategy. Approaching investing with a long-term vision - with a set of goals, targets, and realistic expectations - can help you ride out the ups and downs of financial markets and typically gives your money more time to potentially flourish.
How long should you invest in stocks and shares for?
It’s often not as simple as putting a number on it. Like we’ve already said, investing should be approached as a long-term project, rather than a way to ‘get rich quick’, and you should be ready to hold onto your investments for a number of years. Thinking long-term gives your money time to benefit from the power of compounding - when the returns from your investments generate further returns.
Benefits of long-term investing
The data shows that you’ll almost always be right
Evidence suggests that remaining invested over a number of years tends to pay off. For instance, you’d have had an 87% chance of making a positive return by holding onto your investments for any 10-year period since 1986, even though that period includes three major market events.
You’ll be paying less trading fees
When you buy and sell stocks, you have trading fees to pay and these will eat into any returns you could make. And the more you buy and sell, the more you’ll pay in fees and the less returns you’ll get to keep. So it’s important to keep them to a minimum, and one way to do this is to hold onto your investment for a number of years.
Your investment risk could drop
If your investment strategy is based around diving in and out of the market ‘at the right time’ because you’re looking for the ‘right opportunities’ then you may be missing out on the big up days in the market. Staying invested reduces your risk of missing out on potential gains. If you sell your investments in the hope of avoiding losses, you then make your losses ‘real’. On the other hand, staying invested means that while your investments may go up and down on your dashboard there’s still a chance of getting your money back (and more) in the future.
When your profits get added to your original investment, your pot not only grows, but you give yourself the chance of making even more profit the next year, even with the same return. This is called compound returns, and with it your money should grow faster.
Here’s an example: say you invest £100 and get a 10% dividend in your first year, you’d get a return of £10, which is paid back into the fund, making your investment worth £110. If in your second year your return is still 10%, you’d receive £11 return - this is because the return was earned on £110, not your initial £100. Over the long-term, this accumulative effect speeds up helping your money grow quicker.
Long-term investing takes emotion out of the equation
A more considered, long-term, approach will reduce the possibility of you making rash decisions. You’ll be less likely to abandon the ship at the first sign of a drop in the financial markets. Instead, you’ll know that this is just part of investing and your investments will likely bounce back. Likewise, you’re less likely to sell up when your investments grow a little – because you’re focussed on a future goal and know that over time their value might rise even higher.
You could get stocks and shares at a cheaper price
Whenever there’s a dip in the financial markets, various stocks and shares are often available for a cheaper price. This makes it a great opportunity to put more money into your investments, in the hope that the price of the stocks then bounces back.
We can help
At Wealthify, we have a team of investment experts available to help with your project. We’re regulated by the Financial Conduct Authority (FCA) and up to the first £85,000 of your investments is covered by the Financial Services Compensation Scheme (FSCS).
There are lots of ways that you can get in touch with us - why not call us on 0800 802 1800, or jump on our Live Chat service via Wealthify.com and we’ll talk about your investment strategy.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.