{"id":49583,"date":"2021-10-06T09:40:01","date_gmt":"2021-10-06T01:40:01","guid":{"rendered":"https:\/\/www.imoney.my\/articles\/?p=49583"},"modified":"2021-11-09T16:45:06","modified_gmt":"2021-11-09T08:45:06","slug":"long-term-investing","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/long-term-investing","title":{"rendered":"Here\u2019s Why You Should Treat Investing Like A Marathon"},"content":{"rendered":"

In partnership with\"\"<\/strong><\/p>\n

Investing can seem daunting.<\/p>\n

After all, there are a multitude of factors that can influence financial markets at any given time. Unexpected events \u2013 such as a global pandemic \u2013 have sparked volatility and fear in the market, which may hinder new investors from taking their first step into investing.<\/p>\n

If you\u2019re a relatively young investor, putting a solid investment plan in place doesn\u2019t have to be complex. It helps to think of investing as a marathon \u2013 by steadily investing over many years with the right strategy, you could increase your chances of reaching your financial goals.<\/p>\n

Here\u2019s how.<\/p>\n

<\/span>Why should you stay invested over the long run?<\/span><\/h2>\n

Here are three key benefits of taking the long view with investing:<\/p>\n

a) Potentially better returns<\/strong><\/h3>\n

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.<\/p>\n

MSCI All Country World Index<\/strong><\/p>\n

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Data source: MSCI<\/a><\/p><\/div>\n

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\u2019s 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.<\/p>\n

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.<\/p>\n

b) Compounding returns<\/strong><\/h3>\n

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 <\/em>earnings on top of that.<\/p>\n

To illustrate, here\u2019s how being invested for a longer time can impact your investments as shown in the table below.
\n\n\n\n\n\t\n\n\t\n\t\n\t\n\t\n\t
Age you start investing<\/th>25<\/th>35<\/th>\n<\/tr>\n<\/thead>\n
Starting portfolio<\/td>RM0<\/td>RM0<\/td>\n<\/tr>\n
Monthly investment<\/td>RM500<\/td>RM500<\/td>\n<\/tr>\n
Annual return<\/td>7%<\/td>7%<\/td>\n<\/tr>\n
Investment length<\/td>30<\/td>20<\/td>\n<\/tr>\n
Investment portfolio by age 55<\/td>RM584,726<\/td>RM253,768<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\nSources: calculation for age 25<\/a>; calculation for age 35<\/a><\/i><\/span>\n<\/p>\n

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.<\/p>\n

c) It\u2019s less stressful<\/strong><\/h3>\n

Reacting to day-to-day market events can be stressful, as you\u2019d be constantly wondering if it\u2019s the right time to buy or sell your investments. So, focus on the long term and stick to your investing strategy.<\/p>\n

<\/span>Stay the course with dollar-cost-averaging through unit trusts<\/span><\/h2>\n

Focusing on the long run is important, but how do you actually put it into practice?<\/p>\n

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\u2019ll have to invest the same amount of money at the same schedule no matter if prices go up or down.<\/p>\n

This has two main benefits:<\/p>\n