There has been no shortage recently of commentary on these pages about avoiding the pitfalls of short-term stock-market watching. It’s distracting, short-sighted and susceptible to panic and poor investment decision making. That’s not what investing should be about.
However, instead of simply highlighting the pitfalls of short-term market watching, any observant investment stakeholder also needs to point out what long-term investing should really be about. That’s what I want to do presently.
Avoid distractions and fluctuations
Specifically, long-term investing should be about looking at the long-term. As trite as this might sound, it’s important to keep in mind. That’s because long-term investing really means that you should pay minimal attention to the daily stock-market reports. If you know what you’re doing, you know that a bad labour report doesn’t mean your investment portfolio is in jeopardy.
For example, long-term investing essentially means that you’re literally participating in good investments, whether it’s a company, debt, equity — you name it. If the underlying investment is sound, short-term fluctuations, or other distracting factors, really won’t matter, will they.
Stick to the plan
Indeed, there are various strategies long-term investors can engage in to protect themselves from the volatility of the markets. One, of course, is diversification. Most people know that. But what most people might also not know is that there are various types of diversification. It’s not just about investing in different types of investments, but region is a form of diversification, too, as are other factors.
In addition, every long-term investor should have some sort of game plan, so to speak, that in part anticipates short-term market fluctuations. If you look at just about any long-term chart of investment-market growth, they all go up. That’s in part because good investors stick to their original investment objectives and wait for the returns to come in — over the long term.
ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.