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Six Tips for Long-term Investment Success

Six Tips for Long-term Investment Success

    Bank savings accounts currently offer paltry rates of interest.  If you put leave all your money in banks it should be safe but will not grow much.  The stock market offers much more interesting returns but because of the element of risk many people avoid it.  Worse still they might enter the market at the top and then sell out later at the bottom.  Here are some simple rules to help you navigate the market and build a large stock portfolio over a long period.

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    1. Diversify. Spread your risks by investing in a number of stocks in different markets and in mutual funds, bonds and other instruments. A good rule is that no one stock or other investment should be more than 10% of your total portfolio. Invest in different geographic areas such as US, Europe, Asia and emerging markets. Diversify into property funds, commodity funds and hedge funds. This should give you protection against a collapse in any one particular sector.

    2. Do your research. Take advice from various sources.  Invest in some companies whose products and strategies you like.  There are a multitude of comparison sites and other resources on the internet to help you to analyse and understand investments. Past performance is no guarantee of future performance but I would generally prefer to choose a mutual fund or unit trust that had been a strong performer over the last two years and which offers low management fees.

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    3. Run the stars and sell the dogs. Monitor your investments and compare their performances against the market index.  If some of your holdings do well then the temptation is to cash in and take a profit.  It seems natural but if you are in this game for the long term then you want investments that grow over the long term so when you find winners cherish and retain them.  On the other hand you should ditch the dogs that significantly under perform the market.  The temptation is to hold onto them in the hope of a rebound or worse still to increase your holding at the lower price.  This is generally a poor strategy and it is safer to take a small early loss rather than a large one later on.  Do not cling onto stocks for emotional reasons.  Sell the dogs and run with the stars.

    4. Reinvest dividends.  A surprisingly large part of the overall growth in most portfolios comes from reinvested dividends rather than in appreciation of the stock prices. A yield of 3% may appear small but over a period it makes a big difference. Choose some investments with a solid history of dividends and use them as the ballast in your ship.

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    5. Be contrarian. This advice is much easier to give than to observe.  When the stock market is low buy stocks.  When the stock market is high sell your worst performing stocks and buy other investments such as property or bonds.

    6. Take the long view. You are in this for the long term so do not make frequent trades – the commission will eat into your funds. Do not follow fads and fashions.  Diversify in a sensible way.  Do not panic when markets occasionally crash – these are buying opportunities for the brave.

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    Finally be prepared to sell when you eventually need the money.  You invested it to build financial security for you and your family so it is better to use it when needed rather than to scrimp along in order to become the richest man in the cemetery.

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    Paul Sloane

    Professional Keynote Speaker, Author, Innovation Expert

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    Last Updated on March 29, 2021

    Life Insurance: A Secure Way To Protect Your Future.

    Life Insurance: A Secure Way To Protect Your Future.

    Life is a journey full of ups and downs. No one can actually predict what might happen the next moment; there are times where the happiest moments do not even take a second to turn into the gravest. Planning for your future can help you face such unwelcomed but irrepressible situations with much ease. We all want to make every memorable event of our life more special and to cherish all those moments happily and worry less, you must financially plan your future. But no one has control over life and death. Who would wish to see his family suffer in his absence? Insurance hands over the financial jeopardy of life’s happenings to an insurance company.

    Importance of getting a life insurance

    No one has control over life and death. Nobody would like to see their family suffering in an absence, and that’s why many people recommend life insurance. A life insurance plan is one of the best ways to secure the future of your family, even against those financial troubles after an untimely demise. These plans are safe and credible, and you could trust them for your family’s better future.

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    On the other hand, a life insurance policy is a contract between a company (insurance provider) and policyholder in which the insurance provider ensures to pay a certain amount of money to the nominated beneficiary in case of the policyholder’s death during the term of the agreement. There are different types of insurance plans, and it is important for you to know the benefits of those plans such as a funeral, medical or some life expenses provided they are mentioned in the agreement.

    Choosing the right insurance plan

    If you’re about to select an insurance plan, you should consider some important factors:

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    • The time at which you start investing in a program and the number of family members you want to get insured. Obviously, a married man with two children has different needs compared to a single one. The number of persons who are dependent on an individual also varies from person to person.
    • The next thing you need to consider is you and your family needs. What are your child’s dream, your retirement plans, for how long would your dependents need financial support, any personal injury, etc. And do not forget those events or situations that will surely demand a huge sum of money.
    • The next thing one must consider is your current income. You should preferably choose a plan which you can afford.

    Now you must be having a pretty clear idea of how to choose the best plan for you. Further, you should also compare various plans offered by different companies and numerous sites available online that help will you to compare them.

    Differences between life insurance plans

    Here’s a short brief of some plan categories you can choose according to your needs:

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    • Term Insurance Plan – You have to pay once, and your nominee gets the paid money under your misfortune demise. It ensures a person for a fixed time. If you survive the policy period, you do not get your premiums back.
    • Whole Life Policy – This plan continues for your lifetime. Under this, the policyholder has to pay regular premiums, until their death.
    • Endowment Policy –  In case the individual dies during the tenure, the beneficiary gets the amount assured. If the person survives the policy tenure, they gets back the premiums paid with other investment returns along with several other benefits.
    • Money Back Policy – In this a portion of the money invested is returned to the investor at regular intervals. If you survive the insurance term you get the entire amount back; else the beneficiary receives the entire sum assured.
    • ULIPs – These are the life insurance plans that offer you future security plus wealth creation options.

    Many people do not opt for whole life policy and endowment policy because of the high amount of money you need to pay, while others may prefer to opt for these if they have a high life expectancy. Surely you will find the best one for you.

    So what are you waiting for? Plan for your future and live a happier and carefree life today.

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    Featured photo credit: aryehsampson.com via aryehsampson.com

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