To build an excellent long-term portfolio, you need to follow some rules.
You should only select safe and well-protected businesses. And you should upload them regardless of quarterly or even annual results.
If you do this, you will enjoy the enormous benefits of this type of investment.
Benefit # 1: Compound Interest
Perhaps the most important benefit of all is the power of compound interest .
Compound interest includes reinvesting the interest you receive with the original amount invested.
As an example, suppose I invest $ 1000 in year 1 and receive $ 50.00 in interest. The following year, I reinvest all interest received.
This will mean that in year 2, I will receive interest on a larger amount, of $ 1050, instead of the old $ 1000
In year 3, I will receive interest on an even greater amount of $ 1102.50. With each year that I reinvest interest, my original investment grows at an accelerated rate.
If you’ve ever seen a compound interest graph, you may have noticed that the upward curve of wealth accumulation grows slowly over the first 10 years and then increases rapidly.
Benefit # 2: Simplicity
The second advantage of this long-term structure is simplicity.
You won’t have to follow the markets closely, or even worry about the stock’s performance. Just define a strategy and let it happen.
This strategy, although simple, is one of the most difficult to follow.
It is very common to see people who define an excellent investment strategy based on the long term.
They analyze companies, diversify, do everything right. Hence in the first fall of the stock market, they enter and panic and sell on the bottom!
There is no point in having an excellent plan if you cannot follow it and continue operating with emotion!
So keep it simple. This strategy is good for your pocket and your mind, as we will see in the next benefit.
Benefit # 3: Peace of mind
The third advantage of long-term investment is peace of mind. Using this type of strategy, you don’t worry about market fluctuations.
According to the billionaire, the thirst for quick profits, especially in the stock market, causes many of them to lose good opportunities for long-term gain.
Translating: jumping from branch to branch just focusing on making money quickly may make sense for a while, but it is not a solid plan for the future.
The greatest investor of all time has already said: “Invest only in what you will feel comfortable keeping in case the markets close for ten years.”
Benefit # 4: Don’t Be Too Conservative
Fifth, investing in a long-term portfolio prevents you from being too conservative with your money.
One of the biggest risks of overly conservative investments is losing money on inflation. This can happen with savings accounts.
By investing in excellent companies, your money can grow at higher rates of returnable to beat inflation and prevent equity erosion.
But calm down, I’m not saying you shouldn’t invest in Fixed Income. Yes, you should invest!
However, it must be kept in mind that if you want considerably higher returns, you should also consider investing in equity in the long run.