Long-Term Investors: 10 Keys to Success

For thriving retirees and other investors, there are a few key questions that most ask themselves at some point along the way. Here are ten important questions that every investor should carefully consider.

  1. How do I know I’m getting the best price for my investments? Almost everyone knows the market proverb, “Buy low, sell high.” But we also know that it’s impossible to know exactly when any given asset has reached either its low or its high point. Fortunately for long-term investors, you don’t have to be able to guess correctly about market pricing. You can rely on the individual buying and selling decisions of millions of other investors, happening all over the world every day, to accurately set the price of investments, based on all the known information at any given time. Trust in efficient market pricing is the best basis to use for building your portfolio.
  2. How can I pick an investment or fund that will outperform the market? Historically, your chances of picking an investment fund that will still be around in 20 years—let alone still be outperforming—are about 50/50. Research indicates that only about 19% of US equity (stock) funds and 11% of fixed-income funds have stayed in business and outperformed their benchmarks over the past 20 years.
  3. If a fund has a good track record, doesn’t that mean it will do well in the future? Not necessarily. There’s a reason why the phrase “Past performance is no guarantee of future results” is included in every prospectus.
  4. Do I need to outsmart the market to be successful? The good news is that you don’t. History and research demonstrate that an overwhelming majority of the time, the markets reward investors who have a long-term strategy that they stick to with discipline and consistency.
  5. How can I build a solid portfolio? Financial research indicates that there are certain dimensions of asset behavior, including (for stocks) company size, relative value, and profitability, and (for fixed income) term, creditworthiness, and the currency of the issuing entity. Structuring your portfolio to capture returns along these dimensions will position you to allow the markets to work for you, rather than against you.
  6. That about international investments? The US financial markets represent a little over 50% of the available opportunities worldwide. Diversifying internationally can be an effective way to reduce the overall volatility of your portfolio.
  7. How often should I make changes in my portfolio? Because short-term market movements are impossible to predict (and see #1, #2, and #3, above), trying to “time the market” by making frequent changes in your holdings is usually not a tactic for long-term success. In addition to the near-impossibility of getting the timing exactly right, trading costs and other expenses associated with frequent buying and selling typically erode portfolio value without providing offsetting gains.
  8. Should I trust my gut? Unfortunately, emotions have not proven to be a reliable guide to solid long-term investment growth. In today’s computer-driven, 24-hour-per-day financial markets, logic, discipline, and solid research are your best guides.
  9. What about the financial media? Remember that too often, the purpose of a headline is to generate a click, a “like,” or at least a longer read. Think about it: by triggering an emotional response, a headline can pull your attention to an article, which is the chief goal. Reading the headlines in the media is not the same as studying evidence-based financial research.
  10. What should I do? Your best and most reliable path to building a solid portfolio for the long haul is to work with a professional, fiduciary financial advisor. Fiduciary advisors are professionally and ethically bound to offer advice and recommendations that have your best interests foremost. Rather than selling products to earn a commission, a fiduciary advisor will genuinely seek to understand your goals, needs, and tolerance for risk in order to provide guidance that helps you get where you want to go.

At Empyrion Wealth Management, our chief goal is to understand you and provide the guidance you need to achieve your financial and other important goals. If you would value greater clarity around your financial strategy or portfolio, please click here to learn more about how you can obtain a complimentary “second opinion.”


Stay Diversified, Stay YOUR Course!

Empyrion Wealth Management (“Empyrion”) is an investment advisor registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. Information pertaining to Empyrion’s advisory operations, services and fees is set forth in Empyrion’s current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at www.adviserinfo.sec.gov. The views expressed by the author are the author’s alone and do not necessarily represent the views of Empyrion. The information contained in any third-party resource cited herein is not owned or controlled by Empyrion, and Empyrion does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Empyrion of the third party or any of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner or investment advisor.

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