When investing a common phrase you’ll hear is “it is time in the markets, not timing the markets” that can benefit investors. For example, with a Pension, you are potentially going to be invested for decades, giving you time in the markets to grow your money.
You should always try to view investment with a long-term lens, as hard as that can be at times during market volatility.
Think about it this way, look at the following chart from September 12th 2022 to October 10th 2022, illustrating the performance of global equities.
*All figures above represent pound sterling – Bloomberg Finance L.P 14/10/22
In a short-term sense, the performance has gone down, and it would appear that the investment isn’t performing well.
In reality, when investing, a one month chart isn’t necessarily an indicator for long term investment, and even a one year period is considered short term. If you’re investing in a Pension for retirement, you could be investing for decades.
In relation to the above, investors should keep in mind that when considering long term past performance, it isn’t an indicator of future performance, and clients aren’t investing solely in global equities.
As illustrated below, the 2021-2022 year may have been concerning if looked at from just a short term perspective
*All figures above represent pound sterling – Bloomberg Finance L.P 14/10/22
However, as soon as you think about that same chart in a long-term perspective, five years or more, things start to look very different
*All figures above represent pound sterling – Bloomberg Finance L.P 14/10/22
This illustrates the concept of long-term investing. You’ll notice peaks and valleys within that five-year performance, but ultimately those who invested and stayed invested saw growth.
For example, in 2020 when COVID first spread and impacted the global economy. Selling your investments crystalising losses then, would have seen investors potentially missing out on the big upward curve you see through the second half of 2020 and 2021.
The lesson here is that short term investor reactions can drastically effect your investment goal, the long-term view shows that there can be many ups and downs, although you must keep in mind that past performance isn’t a guide to future performance.
What you can say from the chart is that those investors who did have a long term view saw growth in that five yearperiod.
This is even clearer when we look at the same market in its maximum, going from 1982 to present.
*All figures above represent pound sterling – Bloomberg Finance L.P 14/10/22
If you were a starting out in your career and investing towards a Pension, you’d now be approaching retirement with a return on your investments over a forty-year period.
What can you do to invest for the long term?
Investing for the long term is easy. Start with setting a goal and then regularly invest towards that goal. This is known as closing your gap to goal. You may want to set up a direct debit into your investment to ensure you stay disciplined towards the long-term target.
Try not to be blown off course by short term movements and remember that even a year can be considered short term in the context of a long term investment goal. As illustrated by the charts, long term investment goals such as Pensions shouldn’t be make or break based on what happens in years, it is going to be dictated much more by decades. Even after retirement, your Pension remains actively invested, potentially for decades if you’ve built up a large pot and live a long life. Even after death, your Pension is still invested and can be left to a beneficiary. It is a long term investment before and after retirement.
If you were a starting out in your career and investing towards a Pension, you’d now be approaching retirement with a return on your investments over a forty-year period.
What do our experts say about long term investing?
Speaking on True Potential’s Do More With Your Money show, Financial Adviser Tom Robertshaw had the following to say on long term investing.
“It can be scary for clients, we understand that, but a lot of clients are invested in Pension funds. Pension funds should be invested for the rest of your life if you use it properly. People often think it’s not a long term investment if you’re having to retire in a couple of years time, but even when you’re retired those funds are still invested, and with you for the rest of your life if you use them properly, so you’ve plenty of time to let it recover.”
For more investment insights, subscribe to the True Potential YouTube Channel, where you’ll find daily markets updates in Morning Markets, and weekly investment discussions in the Do More With Your Money show.
With Investing, your capital is at risk. Investments can fluctuate in value, and you may get back less than you invest. Past performance is not a guide to future performance. This blog does not constitute a personal recommendation or financial advice.
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