7 Elements Long-Term Investors Seem To Share In Common

 

Want to learn from the big boys? Ever wondered 7 Elements Long-Term Investors Seem To Share In Common? Long-term investments are a great way to build wealth throughout a lifetime. The problem is that they’re often a scary prospect for those who have never invested before. Thankfully, there are ways to make smarter investment options every step of the way. Of course, no investor will ever make perfect choices, but the savvy ones do set themselves up with a strong chance of success. 

Let’s take a look at the elements these successful long-term investors focus on to come out on top. Before we dive in, keep in mind that this information is general in nature and does not constitute financial advice. These are simply factors many long-term investors take into account. 

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Thinking Of The Future

Before we get into the stock market and other investment avenues, it’s worth talking about super. Probably the longest held investment for most Australians, super helps smart investors build significant wealth for retirement. 

Whether they stick with an industry fund or work with the best SMSF accountant in Australia, these investors tend to salary sacrifice into their retirement accounts each year. This allows them to take full advantage of the tax benefits of contributing to their super. 

Maintaining Financial Order

An investment earning 12% is impressive. However, savvy investors understand that if they’re paying 17% on an outstanding debt, they’re losing out. While certain debts (such as a mortgage or student loans) are generally considered “good”, it’s generally a wise idea to pay down other debts before investing. 

Setting Clear Goals

To ensure they make good buying decisions, many investors set objectives first. By going in with a clear plan, they’re able to make informed choices about all forms of investment, including stocks, real estate, and anything else they’re considering. 

Diversifying Portfolios 

A diversified portfolio helps mitigate risks and gives investors the safety net they need to take a chance here and there. This doesn’t mean they run off and make investments on a whim just because they’re diversified. However, it does give them the breathing room to panic a little less if one of their investments doesn’t work out quite as planned.

Defining Risk Profiles 

Many investors move through different risk profiles throughout their lives. They may start off with bold, high risk investments and gradually transition into less risky investments later in life. While it’s generally said that younger people can often afford to take more risks as they have more time in the market ahead of them, this isn’t a rule. Each investor should define their own risk profile.

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Understanding Time In The Market Vs. Timing The Market

History shows staying invested for the long haul, rather than jumping in and out, leads to better returns. This is because even missing some of the market’s best days can significantly harm an investor’s gains. By consistently investing, it’s possible to ride out the inevitable dips and benefit from the market’s overall growth trend.

Keeping Emotions Out Of It

Money can cause a lot of stress, and panicking can lead to bad decision-making. So long-term investors strive to make their decisions from a place of logic rather than fear. Some investors use a set-and-forget strategy, where investments are automatically made based on the parameters they set. This is often paired with lower risk investments like Exchange Traded Funds (ETFs).

Investing can be a great way to make money, but a quick way to lose it. This is why committed long-term investors tend to do their own research and, if unsure of anything, speak to a financial advisor for personalised support.