You may wonder if you have the right long-term investment strategies in place. Many investors feel confident in making short-term investment decisions, which range for up to a three-year period, as these often take advantage of market trends. However, long-term investments typically span 10 years or longer and may raise additional questions.
If you’ve ever wondered, “Where are the markets heading?” or “Is my mutual fund diversified enough?”, you’re not alone. It can be tempting to withdraw investments earmarked for long-term goals when the market dips. Understanding these four long-term strategies may help you stay invested in your future and understand more about how to invest long term.
1. Stay invested through volatile markets
Historically, it has paid to stay invested through market ups and downs: the stock market has trended upward over the long haul, and it is notoriously difficult to predict when the market is going to shift. The financial crisis of 2008 saw the Standard & Poor’s 500 Index® (S&P 500®)—a market-cap-weighted index that represents the average performance of a group of 500 large-capitalization stocks—plummet to a low of 676.53 on March 9, 2009. It then rebounded over 200% to 2043.92 by December 31, 2015. Staying invested through a drop in the market may allow you to reap the benefits of a subsequent rebound. Missing the “best days” to be in the market, can significantly impact long-term performance over time.
While you can’t invest directly in an index and this performance does not include the typical costs of investing, the following chart shows the growth of $10,000 from 2007 through the end of 2021 if you could have invested it in the S&P 500. The lower half of the chart shows annualized returns if you had invested in the S&P 500 in 2007 and never sold, if you had missed the 10 best days, the 25 best days, or the 50 best days: