While it may seem tempting to invest in opportunities that promise quick returns, keep in mind that these seemingly high rewards typically come with significantly higher levels of risk.
On the other hand, if you focus on investing for the long term, you can reduce your risk and ultimately may end up generating even more wealth than you would have otherwise.
Here are three compelling reasons to focus on long-term investments.
1. Reduce Your Risk
Even when markets crash or decline in the short term, historical data shows us that the stock market trends upward over time because of inflation. The same is true for real estate and many other real asset investments.
If you’re engaging in strategies like day trading or investing money you’ll need to access in the next few years, you’re subject to the whims of the markets, which are constantly changing and impossible to predict with 100% accuracy.
But if you’re investing for the long term, you can trust that temporary fluctuations won’t dramatically impact your financial future.
2. Take Advantage of Appreciation
When you invest in real assets like real estate, the value of those assets will often appreciate over time.
Say, for example, that you purchased real estate in 2021. If you’re in a position where you’ll need to sell in the next two to three years, you could find yourself absorbing a major loss if the real estate market crashes.
If, however, you’re prepared to hold onto your investment through the inevitable highs and lows of the next few decades, you’ll likely see your property appreciate in value. This can add up to significant returns that you can use to fund your retirement, pay for your children’s education, or travel.
3. Increase Your Peace of Mind
If the success or failure of your investments depends on day-to-day economic conditions, you’re likely going to experience high stress levels and anxiety any time the economy is struggling.
And while uncertainty should never stop you from investing altogether, it is worth remembering that your investments should make your life better, not worse.
Fortunately, there is a way to invest with greater peace of mind so you can focus on the things that matter most to you. When you’re investing with a long-term focus, you won’t need to monitor your investments quite as closely, and you won’t feel the pressure to react every time a major fluctuation occurs.
Instead, you can stay committed to your strategy and feel confident that your investments will continue to grow over time.
Focus on Your Goals with Long-Term Investments
As with any investment strategy, make sure you’ve taken the time to identify your specific goals and think about how different opportunities can get you closer to those goals. If you’re preparing to retire in five years then you may invest differently from someone who is not planning to retire for another 20 years. But in general, long-term investments are a proven way to reach your goals, especially when paired with strategies like tax efficient investing.
If you’re looking for a partner who can help you access tax efficient, direct investments that will help you achieve your goals for the long term, our team at FGCPTM would love to connect with you. Simply fill out this form to get in touch.