Optimizing your financial health doesn't necessarily mean working harder. Almost everyone can increase their wealth by making a few strategic changes to their investing strategy. Long-term investing is about planning for the future and securing maximum returns on the money you set aside. Working with a financial planner in Edmonton can give you the professional insights you need to make the right choices.
What Is Long-Term Growth?
In the world of investing, long-term growth (LTG) usually refers to investments that are intended to mature over at least ten years. Most long-term investments grow over even longer periods of time. Saving for retirement, setting up a college fund for your child, and establishing a legacy of wealth are all goals that could benefit from a long-term growth investment strategy.
What Are the Best Investment Options for Long-Term Growth?
All investors have their own unique style. Some are comfortable taking risks that have the potential for high returns, while others prefer a more conservative approach. For most people, the best approach to long-term growth investing is to create a balanced portfolio of well-diversified market shares.
A variety of indexing products are available to individuals who want to plan for healthy finances far into the future. While long-term growth does not need to be a form of aggressive investing, you can usually afford to take on some degree of risk, given the ability of your funds to withstand market fluctuations as they mature. Long-term investments often focus on a balance of stocks and bonds, with emphasis on companies that have healthy fundamentals.
An index fund is an investment portfolio composed of individual selections that are intended to act together to mirror an entire market index. Specific markets that you might choose to mirror include:
• The Canadian TSX
• The Canadian TSX.V
• The American S&P 500
• The Dow Jones
• Various multinational markets, including the MSCI
Index funds are purchased through a brokerage. They are considered ideal for first-time and long-term investors because they do not require the constant, active analysis of individual stocks. Your firm should steer you towards selections that reflect your goals as an investor as well as the timeline of your investments.
Exchange-Traded Funds (ETFs)
Exchange-traded funds are similar to index funds in that they follow a specific market index with the goal of performing comparably. The key difference is that while index funds can only be traded after the market closes, exchange-traded funds can be traded during market hours. Some of the major EFT providers in Canada are BlackRock Inc. and BMO Asset Management.
A mutual fund is a portfolio that is selected and managed to beat the market. As the investor, you will not need to take an active role in this process. Instead, your mutual fund manager will perform the required analysis and make key selections for you. Mutual funds are likely to yield higher returns than typical index funds in bull markets, whereas a more passive approach can better withstand bear markets.
How to Find Your Unique Approach to Investing
There's more to investing than simply choosing among various products. Your financial planner can help you identify an approach that will reflect your priorities and the degree of risk you want to assume. Individual investors often find that they are most comfortable blending several different approaches.
Passive investing is a low-maintenance way to grow your money with the market over time. Rather than buying and selling according to predicted market trends, investors who take a passive approach focus on setting up a dependable portfolio that is expected to deliver reasonable returns, building itself up slowly over several years.
If you are comfortable investing in undervalued stocks or companies that have the potential for large growth, aggressive investing may be your style. This approach involves a high degree of risk because the performance of the investments cannot be guaranteed. Often, aggressive investors try to identify new concepts and companies that have the potential to disrupt existing industries and open new markets.
Value investing focuses on growing capital by putting it into companies and industries that operate according to responsible practices. Social consciousness and environmental awareness are at the heart of value investing, which maintains that the best long-term investments come from funding corporations that respect their employees, promote healthy communities, and consider the ecological impact of their activities.
Dividend investing is an approach that can complement other aspects of a long-term growth strategy. It allows the investor to build a portfolio of mutual or exchange traded funds that includes stocks which are expected to pay out dividends at regular intervals. Dividend investing often prioritizes well-established companies that are expected to continue to perform at a high level and is therefore considered less risky than some other forms of investing.
Can You Pull Out of a Long-Term Investment?
Your financial planner should help you select investment products that perform well and make you feel comfortable weathering the inevitable ups and downs of the market. However, depending on the product you choose, you may have the option to pull out early if you are not seeing the returns you expect.
While hedge or private funds sometimes have a lock-up period of several years, other types of investments allow for premature trimming. However, making numerous changes to your investment strategy can significantly lessen your ability to maximize your returns over time. It is usually best to allow the market value of your investments to catch up with the intrinsic value of your various stocks.
How to Optimize Your Long-Term Investments
Speak With a Financial Planner in Edmonton
Setting up your initial investments for success is key to a long-term growth strategy. Your financial planner should keep you educated and informed while steering you toward the products that can best serve your financial interests.
Rather than selling individual products ourselves, we have built relationships with the most credible firms in the industry. We can give you access to products from a combination of firms without paying the fees required to set up multiple accounts. Our goal is to maximize your investments while keeping the maintenance costs to a minimum, providing you with all of the services you need.
Make Consistent Contributions
When you have a portfolio set up, it is important to put away increments of money consistently. In the beginning, the amount of money you set aside is less important than the regularity of your contributions. Many people choose to fund their portfolios weekly, bi-weekly, or monthly. Your financial planner can help you determine the amount that is right for you.
Manage Your Cash Flow
The more you can optimize your cash flow, the more money you will have to set aside for your long-term investments. Among other aspects of your cash flow, we can help you understand how to pay off debt, manage your assets, and make contributions to a balanced retirement fund. For example, we can analyze your individual financial situation and answer questions like:
If I have extra money at the end of the month, should I put it towards a credit card payment or a retirement fund?
How can I take advantage of a tax credit after purchasing a home?
How much do I need to increase my income to meet my long-term saving goals?
Seeing your long-term investments grow is a rewarding experience that can greatly benefit you and your loved ones. When deciding where to put your money for the long haul, a financial planner in Edmonton can help you feel confident and secure. To discuss your financial goals with us, reach out to DeHaan Private Wealth.