Here’s Why You Should Treat Investing Like A Marathon
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Investing can seem daunting.
After all, there are a multitude of factors that can influence financial markets at any given time. Unexpected events – such as a global pandemic – have sparked volatility and fear in the market, which may hinder new investors from taking their first step into investing.
If you’re a relatively young investor, putting a solid investment plan in place doesn’t have to be complex. It helps to think of investing as a marathon – by steadily investing over many years with the right strategy, you could increase your chances of reaching your financial goals.
Why should you stay invested over the long run?
Here are three key benefits of taking the long view with investing:
a) Potentially better returns
While the stock market has endured crises, such as the US Subprime crisis, European Debt Crisis and recent Covid-19 outbreak, it tends to recover and trend higher.
MSCI All Country World Index
For example, the chart above shows the performance of the MSCI All Country World Index, which has been tracking global equity performance since 1988. In other words, it’s a representation of the global stock market. In the short term, market recessions or volatility have caused stock prices to fall, but over the long term, market could trend higher following the recovery in economy.
Volatility has always been part and parcel of the investment landscape. However, with a long-term investment horizon, you could be in a better position to ride through the volatility as market tends to reward patience and persistence.
b) Compounding returns
The longer you stay invested, the more time you give your investments to compound. For instance, when you invest, you may receive earnings in the form of capital gain, dividends or distributions. If these earnings are reinvested, you could receive more earnings on top of that.
To illustrate, here’s how being invested for a longer time can impact your investments as shown in the table below.
|Age you start investing||25||35|
|Investment portfolio by age 55||RM584,726||RM253,768|
In the example above, staying invested for twenty years at an annual return of 7% means having an investment portfolio of RM253,768. But if you had invested for an additional ten years, that amount would have grown to RM584,726. In other words, with the same amount of investment every month and provided the same rate of investment return is maintained, the portfolio value is more than doubled if you had invested earlier.
c) It’s less stressful
Reacting to day-to-day market events can be stressful, as you’d be constantly wondering if it’s the right time to buy or sell your investments. So, focus on the long term and stick to your investing strategy.
Stay the course with dollar-cost-averaging through unit trusts
Focusing on the long run is important, but how do you actually put it into practice?
The answer is with a dollar-cost averaging (DCA) strategy. This means investing a fixed amount of money at regular intervals (such as monthly or quarterly). With DCA, you’ll have to invest the same amount of money at the same schedule no matter if prices go up or down.
This has two main benefits:
- You won’t be swayed by emotions. By keeping to a fixed schedule, you no longer have to decide when to invest. This helps you avoid fear or greed-driven decisions, such as selling your investments when prices dip or investing more when prices are at all-time highs.
- You invest when prices are low. It can be tough to decide to invest more when prices are low, for fear that prices will decline even further. But by keeping to the DCA method, you’ll be buying more shares or units when prices are low, giving you potentially more returns when the market rises again over the long term.
Consider using the DCA method with unit trust funds. Unit trust funds pool money from many investors to buy a group of stocks, bonds and other assets. Here’s why pairing DCA with unit trusts can be a powerful strategy:
- Possible to invest with minimal funds. With unit trust funds, you’ll typically need an initial investment of RM1,000, but each subsequent investment can be as low as RM100. This makes it more affordable for small investors, who have lower disposable income.
- Less risky. Unit trust funds make it easy to diversify risk exposure. When you invest in unit trusts, you’re investing in a group of investments. As the saying goes, “don’t put all your eggs into one basket”. A diversified portfolio will help widen the spread of risks, and hence cushion the impact should any of your particular investments perform poorly.
Ready to start?
If you’re looking to start your journey on investing in unit trusts, Hong Leong Asset Management Bhd (“Hong Leong AM”) offers a range of both conventional and Islamic funds that are managed by professional fund managers. Hong Leong AM is an established unit trust management company that has received the Best Equity Group Award – Malaysia Provident, at the 2021 Refinitiv Lipper Fund Awards1.
Hong Leong AM’s 1award-winning funds include the following:
|Fund||1-Year return (%)|
(31/8/2020 to 31/8/2021)
|3-Year return (%)|
(31/8/2018 to 31/8/2021)
|5-Year return (%) (31/8/2016 to
|Hong Leong Asia-Pacific Dividend Fund||16.54||81.78||112.62|
|Hong Leong Dana Makmur||70.18||100.14||136.34|
|Hong Leong Dividend Fund||60.29||70.59||109.96|
|Hong Leong Growth Fund||21.19||43.31||78.44|
Hong Leong AM’s low minimum investment requirements make it easy to apply the DCA strategy, so you can grow your investments over the long run.
Find out more about reaching your long-term investment goals with Hong Leong Asset Management Bhd.
12021 Refinitiv Lipper Fund Awards – Malaysia:
– HONG LEONG ASSET MANAGEMENT BHD (Best Equity Award – Malaysia Provident)
– Hong Leong Dividend Fund (Equity Malaysia Income – Malaysia Provident, 5 Years)
– Hong Leong Growth Fund (Equity Malaysia Diversified – Malaysia Provident, 5 Years)
– Hong Leong Asia-Pacific Dividend Fund (Equity Asia Pacific ex Japan – Malaysia, 3 Years and 5 Years)
– Hong Leong Dana Makmur (Equity Malaysia – Malaysia Islamic, 3 Years & 5 Years)
– Hong Leong Dana Makmur (Equity Malaysia – Malaysia Provident, 3 Years)
2021 Refinitiv Lipper Fund Awards – Global Islamic:
– Hong Leong Dana Makmur (Equity Malaysia – Global Islamic, 3 Years & 5 Years)
*Transactions such as subscription of fund, redemption and/or switching.
This article has not been reviewed by the Securities Commission Malaysia. Investors are advised to read and understand the contents of the Hong Leong Master Prospectus dated 23 August 2019, First, Second and Third Supplementary Hong Leong Master Prospectus dated 18 November 2019, 27 March 2020 and 31 December 2020 respectively (the “Prospectus”) and Product Highlights Sheet (the “PHS”) before investing. The Prospectus has been registered and PHS lodged with the Securities Commission Malaysia which takes no responsibility for the contents of the Prospectus and PHS. The registration of Prospectus or lodgement of PHS with the Securities Commission Malaysia does not amount to nor indicate that the Securities Commission Malaysia has recommended or endorsed the fund. A copy of the Prospectus and PHS can be obtained from any of Hong Leong Asset Management Bhd’s offices, agents or authorised distributors and investors have the right to request for it. Investors should also consider the fees and charges involved before investing. Prices of units and distributions payable, if any, may go down or up and past performance is not a guarantee of future performance. Investors should be aware of the risks associated with each fund before investing. The Funds may not be suitable for all and if in doubt, investors should seek independent professional advice.
Refinitiv Lipper Fund Awards, ©2021 Refinitiv. All rights reserved. Used under license. These awards are awarded by an independent fund data provider, Refinitiv Lipper