The power of long-term investing amidst economic challenges

June 28, 2023

The average person on the street has had a difficult year as central bankers continued to battle stubbornly high inflation. This has resulted in rising interest rates with no end in sight. Equally, we have had to deal with a weak currency that has provided no relief as oil prices rose as well.

Additionally, the world still looms in the shadow of conflict as geopolitics has recently emerged as the top news story, and all of this is set against a backdrop of global macro uncertainty. One might be excused for wanting to hide their money under the bed or run for the hills.

The question most of us are asking is, what other options do investors have if they cannot just do that and leave? You would be surprised by the response, and you might even scoff at it. Most of the time, the best choice is to do nothing and stay still. The question you might then ask is how?

Investors frequently believe that the existing status quo will triumph and last for an extended period because they misinterpret short-term volatility for continuing long-term trends. Selecting investment instruments or funds is the biggest concern a new investor encounters. Once you have finished, you can relax and let time take care of the rest. Experience and years of data have shown that investors who follow a diversified long-term strategy, and do not try to time the market while remaining invested, outperform their peers significantly eventually. 

The key concern should not be what we should invest in, but why and for what purposes we invest. By narrowing our attention in this way, we can avoid traps and missteps while getting much closer to the solution. For instance, a client might want to start saving once their child is born for their child's university expenses. In this case, they should concentrate on longer-term instruments and funds because the "why" and "what" indicate that it is an investment for the long term.

A thought that might cross our mind is whether this provides us comfort and lessens the fear associated with market dips. Sadly, not. But precisely because of this, you should do this with the help of an authorized financial planner who will, in trying times, remind you of the plan you created together and why it is the best one for you.

Do not let short-term feelings or perceived negativity affect how you think or behave overall. Starting out with a clear sense of your beliefs and intentions will help you decide how to approach investing.

* Stephen Baard is Wealth Manager at Old Mutual Wealth, Old Mutual Namibia

Rate this item
(0 votes)
Last modified on Thursday, 29 June 2023 12:42

Joomla! Debug Console


Profile Information

Memory Usage

Database Queries