Long-term Investing

The Importance of Staying Focused on the Long Term

Over time, equity markets have experienced a series of ups and downs. The best way to deal with these market fluctuations is to remember your investment goals and stay focused on the long term.

With a properly diversified portfolio of investments geared towards meeting your financial goals, the day-to-day fluctuations of the markets shouldn't affect your plan. If you find yourself distracted by dramatic headlines in the financial news, these steps will help you stay focused:

Know the potential volatility of your investments
This will help you maintain your perspective during a performance crunch.
Assess the amount of risk you are comfortable with
If you cannot bear the thought of your investment going down in value, stick with guaranteed or low-risk investments. If the prospect of market fluctuation doesn't alarm you, and you're patient, consider devoting part of your portfolio to investments geared for growth.
Diversify your investments
Combining a variety of investments with different characteristics helps to stabilize returns and reduce volatility.
Gear your asset allocation towards your goals
Asset allocation involves combining investments from the three main asset classes: equities, fixed income, and cash.
Look at the long term
The longer your time frame, the better chance your investments have of reaching their potential.
Don't panic
Don't sell just because an investment declines. If you bail out at the bottom, you're locking in losses, and missing out on potential future profits.
Don't jump from to investment to investment
Many investors are prompted to change their portfolios on the basis of unusually strong one-year returns in another type of investment. Last year's winner isn't necessarily going to be next year's top performer.

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