By Ross Marriner
In today’s world, we have grown accustomed to getting almost anything we want with just a click of a button. While this convenience has undoubtedly made life easier, it has also come at a cost—it has made us more impatient.
When it comes to investing however, a truly long-term perspective is essential. It is the patient tortoise that wins the race, while those seeking quick returns often end up making poor decisions that deplete capital. Warren Buffett, one of the most successful investors of all time, wisely noted that “the stock market is a device for transferring money from the impatient to the patient.” Peter Lynch, another legendary investor, said that “the stock market is a long-term game, and people who realize this make money.”
For most investors, growth assets such as shares or equities should form an integral part of a diversified portfolio. Unlike a bank account which earns a known quantum of interest every month, stock markets go up and down and are affected by many factors such as economic indicators (inflation, exchange rates and interest rates), global events, government regulations and corporate earnings, to mention a few.
Investing—unlike speculating—is a long-term commitment and it is crucial not to be swayed by daily market fluctuations. This does not mean you should be passive during uncertainty, but it does mean you should avoid panicking and making hasty decisions that you might later regret.
The core principles of investing are relatively simple. Start as early as possible and make saving a priority. Build a well-diversified portfolio that includes both income-generating assets and higher-growth opportunities. Only invest in assets you understand and steer clear of anything that sounds “too good to be true.” Focus on long-term growth rather than frequent trading and reinvest income such as dividends and interest to benefit from the power of compounding. Take advantage of tax- efficient investment options when available and maintain realistic expectations about potential returns. Above all, stick to your plan and avoid following the crowd.
Historically, stock markets have not moved upward in a straight line. There will be corrections along the way, but over time, the trend has always been upward. Equities have outperformed other asset classes such as cash, bonds and property in the long run, although there have been periods when they have underperformed. For amateur investors, trying to time the market or frequently switching between asset classes is usually a losing strategy. By doing so, they often miss out on potential rebounds during market recoveries. If your investments were chosen with sound judgment, you should not be overly concerned by market downturns; these are typically followed by recovery.
Staying invested for the long haul is a far more rewarding approach.
In times of uncertainty, it is wise to consult a Certified Financial Planner® who can provide valuable guidance and support, helping you navigate the market with a steady hand.
Rands and Sense is a monthly column, written by Ross Marriner, a CERTIFIED FINANCIAL PLANNER® with PSG Wealth. His Financial Planning Office number is 046 622 2891.
