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Long term investment advice

6 tips for getting more from your investments  

If you’re like most Australians, you’ve probably heard this advice many times: “You need to have a long term horizon for your investments”.

And there’s no doubt that taking a long-term view to investing is important in providing both income and growth in your assets’ value.

What do we mean by “long term investments”? Basically, we’re talking about an investment you make over a term of 7 to 10 years or more. This investment horizon gives you a better chance of reducing losses, and benefiting from the long-term upward trend.

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All of that is well and good – but just how do you go about investing for the long term? How does this principle apply to you? And exactly where should you invest your money for the best long term results?

In this news post, Henderson Matusch’s financial advisers look at long term investment advice, and offer 6 tips for getting the most out of your investments.

1) Diversify your investments

When you’re investing for the long-term, it’s important to diversify and ensure you don’t have all your eggs in one basket.

Obviously, different assets will have different income and growth characteristics, which is why it makes sense to spread your risk over several asset classes. Some investments are more geared to provide an income stream, and less likely to have volatility. 

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For example, property or shares may well grow in value over the long term, but in the short term can be subject to pricing and market fluctuations. 

When you’re thinking about asset diversification, ask yourself, “How is it going to contribute to the needs you have now and in the future?” The answer to this question could help you decide where to invest for the long term.

2) Understand the relationship between risk and return

When planning your long-term investments, make sure you gain an understanding of risk versus returns.

Typically, the greater return your investments bring, the more risk you’ll experience – and vice versa. That means cash will offer minimal risk, but next to no growth over the long term. On the other hand, investing in shares will be riskier than cash, but could bring you greater profits especially over the medium to long term.

Depending on your situation both options could be equally valid, so long as you understand your risk and its effects, right from the beginning.  

Investment tip – Make sure you invest in growth assets

As the old saying goes, “A dollar today is not a dollar tomorrow”. That means that if you rely on cash for your long term investments, you run the risk of not getting (and staying) ahead of inflation.

Far from being an appreciating investment, with cash, you are losing money over the long term. Instead, look to invest in an asset class that offers a better balance of return versus risk.

 

3) Make sure you keep your long term goal in mind

When you’re investing in growth assets, it’s important to remember that you will see fluctuations in the value of your investments over time. That’s normal.   

Don’t focus on these short-term ups and downs, but instead, take care to manage that risk appropriately to get the best long term outcome from your investment selection.

4) Remember that fluctuations can be an opportunity

Speaking of price fluctuations, remember that when you invest in quality assets, fluctuations can be an opportunity for you to actually invest in more of that asset class.

It’s another reason why keeping a cash (or credit) reserve on hand “for a rainy day” is so important. Make sure you have a regular savings plan in place that will allow you to take advantage of fluctuations as they occur.

Investment tip – Keep your future needs in mind when investing

When you’re choosing where to invest, consider what your future may hold. If you’re going to need access to cash within your long-term investment timeframe, make sure you choose assets that are more easily liquidated when necessary.

 

5) Consider the tax implications of your long-term investments

When you’re choosing a long-term investment, remember to think about the tax implications, and how they’ll affect you both now and in the future. 

When you’re thinking about tax implications, consider how your investments should be structured – for example, in a personal trust or perhaps by a company. Be aware though that you might not need to set up a (potentially costly) structure to get the best outcome from your tax situation.

6) Always invest with your end goal in mind

Lastly, remember that there’s usually very little to be gained from investing for investing’s sake. So ask yourself, “Am I investing with an end goal in mind? Or am I just investing for the sake of it?”

Think about what you’re trying to achieve with your long-term investments. What future goals or dreams do you have in mind for them? Will your investment strategy help get you there? Or would you be better served by taking a different approach?

Meeting with a HM financial adviser

Talk to Henderson Matusch for help with achieving your goals

You don’t need to be wealthy to see a financial adviser – but after seeing one, you’ll know when you will be wealthy. For a complimentary obligation-free chat with a Henderson Matusch financial adviser, simply call us on (07) 3229 3688 or fill out the simple contact form here.

Topics: wealth building

Posted by Henderson Matusch on Sep 24, 2018 9:19:08 AM

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