Select Page

Why Long-term Investing Makes Sense

 

Most market-savvy financial professionals who have been around the block a few times will tell you that sound long-term investing will generally prove to be a profitable endeavor. Let’s continue to explore why creating a long-term investment plan can be so beneficial.

 

Generate Long-Term Investing Plan

You wouldn’t go on a long trip without making a plan. You would formulate your itinerary, determine if you need accommodations, and figure out when you will depart and return. If you are leaving for an extended period, you’ll have the mail halted and have someone periodically check your property.

 

The same holds true for sound long-term investing. A well-thought-out plan is mandatory for a greater chance of success. You need to determine what your goals are (retirement, college, vacation home), what financial vehicles (stocks, bonds, mutual funds, real estate, insurance products) you will use, and how you will fund these investments (initial lump sum followed by periodic additional investments). In addition, your plan should account for course corrections, as needed, on a periodic basis.

 

Benefits of Long-Term Investing

By sticking with your investment plan over the long haul, you can enjoy many benefits. These might include:

 

One of the advantages of long-term investing is that you don’t pay attention too much to the daily ups and downs of the market. Because you are in it for the long haul, your investments are designed to weather the daily and weekly fluctuations.

 

Indeed, you employ strategies that can help market volatility to work for you. When you systematically add to your portfolio and the market is down you are essentially forced to “buy low” (and vice versa when the market is up).

Meanwhile, any dividends and interest you receive are ideally reinvested into your investment vehicles. This can produce the benefit of compounding, by which your nest egg can grow more over time.

 

Finally, the federal tax code often rewards those who make long-term investments. You will be taxed on capital gains. If you hold your investment more than a year before taking any gains, the tax you will owe will be less than those of short-term gains in most cases.

 

Investing involves risk, including possible loss of principal. Neither asset allocation nor diversion ensure a profit or guarantee against losses. Insurance guarantees are backed by the financial strength and claims-paying ability of the issuing company. Absolute Retirement Solutions does not offer investment, tax, or legal advice or services. Always consult with qualified financial, tax, and legal advisors concerning your own circumstances.