It’s always tempting to succumb to the here and now – buying a new pair of trainers, paying for that extra round of drinks, or treating yourself to an unexplainably large amount of snacks. But stopping to consider a financial strategy for the long-term could pay off in a big way.
History shows that market gains grow faster than standard savings rates in bank accounts. Using this data, it’s reasonable to suggest that markets could expect to return about 5%. With this type of growth year after year, the benefit of compounding and time will mean that money invested today will make huge strides towards a better financial future for you.
Once you’ve invested your money, the temptation will be to watch how it performs each day, and possibly each hour. It’s important to remember that markets move up and down each day, and sometimes they move down for longer periods of time.
It’s important to remember, however, that markets have historically recovered. If you have invested in a diversified manner, spreading your risk in different asset areas, then it is likely that your investments will recover too.
By focusing too much on the short term you might sell out too early – this way you will lock-in your losses and not give your stock the chance to recover its price. Take a step back and make sure you have the bigger picture in mind when making any further investment decisions.
To be a successful business owner and investor, you have to be emotionally neutral to winning and losing. Winning and losing I just part of the game.
- Robert Kiyosaki, Author of Rich Dad, Poor Dad
The global economy crashed in 2008, meaning that markets entered a decline for around a year and a half. Many investors sold their investments in a panic, meaning that mood and stock prices went down even further.
In that year alone, the FTSE100 dropped 31%, wiping out £484 billion from the UK’s largest companies. Since then, however, it has grown by approximately 50%.
When you’ve invested, it’s important not to forget the risks of what you are doing. There is always a chance you will lose money, so only invest what you can afford.
Also bear in mind, however, that the market moves in cycles – if your portfolio is losing value, try and understand whether anything has fundamentally changed from when you made the decision to make that investment. While there’s no guarantee the price will recover, history is likely on your side.
Your capital is at risk. The value of your investments can go down as well as up and you may get back less than your original investment.