4 Long-Term Investing Strategies That Work — Anthony Norman

Bring balance into your investment plan

A quote attributed to Titus Maccius Plautus, a Roman comic playwright, has relevance for today’s investors: “In everything the middle course is best: All things in excess bring trouble to men.” Balance serves as the ideal goal for long-term investing. Needs change over time, and shortcut strategies that may work one year can prove ineffective, and even costly, the next. U.S. News asked experts to weigh in on some of the soundest investing strategies to use throughout your life. Here’s a look at 10 of the best long-term investment strategies.

Have a financial plan.

A financial plan can help you figure out your risk tolerance at different points in your life as you move toward a clear retirement goal. Sticking with a sound plan can also help keep you from trying to time the market based on emotions and can help you stay disciplined, which is a key factor in long-term investing. “If an investor is honest about what they want to accomplish at each phase of life, along with understanding their risk profile, the investing strategy will be designed to help them stay the course and remove the opportunity to chase investments based on emotional triggers,” says Jack McGowan, CEO with Two Point Capital Management. A financial plan will help you focus on the types of stocks and bonds in your portfolio and whether you opt for a traditional 60/40 portfolio or you adjust that mix. “Once you understand your return objective and risk tolerance, a proper asset allocation can be established, and appropriate benchmarks can be applied,” says KC Mathews, chief investment officer at UMB Bank.

Start investing as early as possible.

The longer money is invested, the more potential it has to grow. “When you start early … not only do you get the compounding effects of the capital, but you also create the opportunity to buy at an average cost over time,” says McGowan. Someone who contributes $1,000 a year to an IRA from ages 20 to 30 and then stops (not that stopping is a good thing) has an edge over someone who starts at 30 and invests $1,000 annually for 35 years. Assuming a 7% annualized return, the first person will have $168,515 at age 65, and the second will have $147,914. “Invest early and often,” says Robert Johnson, a finance professor with Creighton University.

Don’t try to time the market.

Time is your friend in the market over the long run, but you shouldn’t try to time the market in the short term. “It requires two decisions: when to get out and when to get back in,” McGowan says. “(It’s) tough to get both right over time.” Obsessing about getting out and back in at the right times can lead to missing out on big recovery days and can significantly lower returns for long-term investors, says Mathews. “Given that the best performance days tend to be clustered among and closely after the worst performance days, staying invested through market cycles can help achieve better long-term results,” says Theodore Schneider, portfolio advisor with Round Table Wealth Management.