3 Smart Principles for Long-Term Investing

Apr 11, 2017 | Blog, Wealth Management

The key to successful investing isn’t trying to predict where the market will move next; it involves sticking to the facts and a long-term plan. Rather than relying on intuition or crystal balls, prudent investors follow some time-tested principles for long-term investing.

Here are some of those principles you can stick to in order to achieve long-term success:

Cash is rarely king

Cash might seem like a safe haven during turbulent times, and even an opportunity to grow your wealth through interest rates.

While cash might seem like a safe option, you’re not only missing out on opportunities for growth; you’re also losing purchasing power due to inflation. The average interest rates for savings accounts have been far below the rate of inflation. This translates to every dollar shrinking in value annually, with little to no opportunity for growth.

Compounding can be enormously beneficial

Compound interest has been dubbed the eighth wonder of the world for a good reason: it allows your wealth to exponentially increase over time. Essentially, if you stay invested, this provides “interest on interest” – any interest earned is tacked on to the principle, thus creating bigger interest in the future.

It’s one of the smart principles for long-term investing because it provides extraordinary value over longer time frames.  By reinvesting your wealth over the years, you can see a small amount snowball into a healthy nest egg.

Staying invested is important

The stock market can have a bad day, week or even month or longer, but research shows that long-term investors who stick it out are much less likely to suffer loses.

Not timing the market is one of the principles of long-term investing because it often results in the opposite of its intended results. Although it seems like common sense to leave a badly performing market, no one can predict when it will recover with complete accuracy.

That’s why staying invested is one of the principles for long-term investing – although you may have to weather some bad returns, you can benefit from the stock market’s recovery that’s always occurred over time.

Learn more about the principles for long-term investing

At LexION Capital, our investment decisions are purely guided by academic research and the math and science of the markets. Contact us today to learn more about our principles for long-term investing, and see how they can help you achieve your financial goals and needs.

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