Equity markets in the US, UK and Europe have been heated by government stimuli over the past year, with returns causing many people to make impulsive decisions. Financial markets are, by their nature, constantly evolving, so it’s important to maintain a disciplined approach to your investment strategy. Here we offer six basic principles to keep in mind as a long-term investor.

Chess pieces against a colour background

Start early

It goes without saying that the sooner you start investing, the better - starting young is the key to wealth accumulation, so don’t wait for the right time. Even though it does help to be aware of market cycles and how certain events might impact corporate performance, there is no “right time” to start investing. If you are considering investing for the first time, an experienced Financial Adviser will be able to offer sound advice and guidance, based on past cycles and current projections.

Invest for the long term

Investment is a marathon, not a sprint. It is essential that you take a long-term view on investment - Sable Wealth recommends at least a 10-year range. The longer the investment period, the more likely you are to make money and the less likely you are to lose. This is simply because a long-term view enables you to ride out short-term market volatility and grow your investments steadily over time. Also, compounded over time, the return from your investments will make your money grow.

Have a solid asset strategy

An important way to protect your investments from market fluctuations and reduce overall portfolio risk is to develop a solid asset allocation strategy. This is essentially the process of spreading your investments across different asset classes – stocks, bonds and short-term investments, such as cash instruments. When developing your personalised strategy, your broker will take into account your financial goals (retirement, children’s education etc.); your risk tolerance; and the time horizon of your investments.

It’s essential to diversify across asset classes. Together with your broker, you will consider your unique goals and circumstances and invest a percentage in each of the asset classes – stock, bonds, and cash. It is equally important to diversify within each asset class to further minimise risk.

Avoid market timing

Market timing – the strategy of making buy/sell decisions by trying to predict future market price movements – can be dangerous and should be avoided. Markets naturally move in cycles, but this doesn’t mean it’s possible to predict when to get in and out. Market timing is therefore more of a gamble than a legitimate investing strategy. It is a far better strategy to stay fully invested over the same period, even during times of market stress.>

Avoid fads

If everybody is talking about it, you should probably avoid it – if it’s truly the next big thing, you are probably too late anyway. History has shown time and time again that the next big thing is never big for very long. Fads are not to be confused with trends. Trends tend to persist over time and are based on investment fundamentals, whereas fads are generally marked by short-term over-enthusiasm, which often turns out to be unsustainable.

Review and re-balance when necessary

It’s always a good idea to review your investment portfolio from time to time to ensure it is performing well and is still aligned with your long-term strategy, goals and expectations. This is especially a good idea when your life circumstances change – for instance if you get married, have children or experience a change in your income.

For sound investment advice and expert services, contact Sable Wealth on 020 7759 7519 or emailwealth@sableinternational.com.

We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you'll do so with the backing of experienced local experts.