8 Timeless Principles of Investing
- FOCUS ON WHAT YOU CAN CONTROL
Market movements, business decisions, economics, politics, interest rates—many factors can influence the performance of your investments. Instead of worrying about events that are out of your hands, focus on that which you can control.
- PUT TIME ON YOUR SIDE
The financial markets reward long-term investors. People expect a reasonable return on the capital invested. Historically, the capital markets have consistently provided growth of wealth that has more than offset taxes and inflation.
- TUNE OUT THE NOISE
News cycles driven by fear, uncertainty, and doubt can challenge even the most disciplined investor. Some headlines spark anxiety, while others lure you into chasing trends. Being bombarded with data can cause one to second guess and make faulty investment decisions. When uncertain, it’s often better to tune out the noise and focus on the long-term perspective.
- DON’T TRY TO TIME MARKETS
You’ve probably heard someone say that “buying low and selling high” is the key to investment success. The problem is that you never know how the market will perform from year to year or which sector will perform best. Yesterday’s winner may be tomorrow’s loser, and chasing performance is rarely a successful strategy. Instead of trying to time markets, adopt a prudent investment strategy that seeks to protect and grow your investments in all market environments.
- UNDERSTAND ALL FORMS OF RISK
Market risk—or the risk of your portfolio losing value—isn’t the only one you should be thinking about. Longer lifespans and rising healthcare costs mean that many Americans face the very real danger of running out of money during retirement. While you shouldn’t be reckless about risk, make sure that fear of investment loss isn’t leaving you open to other forms of risk such as inflation and interest rate risk.
- AVOID THE EMOTIONAL ROLLER COASTER
Emotional decision-making can wreak havoc on your long-term portfolio returns. A recent Dalbar study found that while the S&P 500 returned 9.9% between 1995 and 2014, the average investor fared much worse, seeing only a 2.5% return during the same period. Why? Research suggests that investors make poor investment decisions about buying and selling, frequently driven by the opposing emotional forces of fear and greed.
- KICK UP THE SAVINGS
Spending less and saving more is one of the best things you can do to boost your long-term financial outlook. Consider a simple example: if you had $250,000 in savings, earned an annual salary of $100,000, and invested 10% of your salary each year at a 6% annual return, you would have $812,750 in 20 years. Yet, if you increased your savings rate by just 1% each year to a maximum of 15%, you’d end up with $966,269.
- DELEGATE THE DETAILS
Financial professionals can help you create a customized portfolio strategy that’s built around your unique goals. But use a professional that is a fiduciary, someone in a position of trust with accountability like a Registered Investment Advisor (RIA). An RIA must do what is in the best interest of their client at all times. Though we can’t control markets, we can help you use them to pursue your long-term financial goals.
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The content of this article is for informational purposes only and is not intended as an offer or investment advice to buy, transfer or sell any security or investment vehicle. Information contained herein has been obtained from sources deemed reliable, though Spire Wealth Management LLC, Spire Securities LLC and affiliate Compass Asset Management Group LLC, do not guarantee its accuracy. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions of Spire Wealth Management LLC, Spire Securities LLC or other affiliates.
Spire Wealth Management LLC is a Federally Registered Investment Advisor. Securities offered through an affiliate, Spire Securities LLC. Member FINRA/SIPC.