Investing for the long term can seem daunting, but a JPMorgan analyst, Jan Loeys, has some valuable advice to make it simpler and more rewarding. To set the stage for success, it’s crucial to adopt a different mindset compared to short-term investing. Let’s explore Loeys’ key tips for making the most of your investments over the long haul.
Keep it Simple
Pexels | Consider a global equity fund and a broad credit fund in your home currency.
Building a long-term portfolio doesn’t have to be complicated. Loeys suggests sticking to two diversified funds. Look for options with easy-to-understand risks, low fees, and high liquidity. A global equity fund paired with a broad credit fund in your home currency can be an excellent starting point. Avoid frequent buying and selling, and consider strategic overweights to enhance your strategy.
How Much Risk to Take?
Investing for a long time means making smart choices. Loeys says young investors should pick higher-yielding things, like equities (which means stocks), instead of safer but less rewarding options. Don’t let quick changes in the market decide what you do. It’s important to be patient, stay calm when prices go down, and wait for things to get better. This way, you can make your money grow over time.
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Pexels | Younger investors can focus on higher-yielding assets like stocks.
For younger investors: Consider an 80/20 or 90/10 split between equities and bonds if you have a substantial amount of money and can withstand market falls.
- For older investors: With a shorter investment horizon, a more conservative approach is recommended.
Regime Change
While macroeconomic factors may influence short-term market movements, they have limited impact over the long term. However, investors should stay alert to significant global transitions that could affect their investments. This could include shifts like de-globalization, de-dollarization, and higher interest rates. Acting swiftly before such a “regime change” becomes apparent and priced in can be advantageous.
What to Ignore
Pexels | Younger investors can focus on higher-yielding assets like stocks.
Avoid falling into the trap of thematic investing, which involves following trends like digitalization or fintech. These trends often underperform the broader market. Instead, consider starting with a theme that isn’t yet widely accepted, presenting a serious risk rather than a guaranteed success.
- Thematic investing pitfalls: Trends like digitalization and fintech may not always lead to successful investments.
- Alternatives: While loans on businesses and infrastructure may seem appealing, they aren’t significantly different from traditional bonds and equities.
Long-term investing doesn’t have to be complex. By keeping it simple, understanding your risk tolerance, staying aware of potential regime changes, and avoiding trendy but risky themes, you can set the stage for a successful and rewarding long-term investment strategy. Remember, patience and a clear plan are your allies on this financial journey.
