The Benefits of Long-Term Investing
Long-term investing focuses on achieving a favourable rate of return over a predetermined holding period while ignoring short-term market volatility.
Attempting to time the market does not reliably lead to higher returns. It is time in the market that results in greater investment success.
6 Benefits of Long-Term Investing
Long-term investing typically has an investment horizon of 5-10 years or longer and can provide a number of benefits relative to shorter-term investment strategies. These benefits include:
Risk/Return Benefit
Long-term investing provides the ability to accept greater risk for potentially higher returns over a longer time horizon. A strategy of investing regularly over time can also incorporate the advantage of dollar-cost averaging to smooth out the ups and downs of shorter-term market volatility.
Cost Savings
A long-term investment approach typically involves less frequent trading which reduces costs related to brokerage fees and commissions.
Removes Emotional Decision-Making
Emotion should not play a role in investment decisions. Decisions should be based on your objectives. It is easy to become anxious with every high and low in the stock market. Having a long-term discipline enables you to ignore short-term market movements and market media hype.
Tax Advantages
Compared to short-term investors and day traders who are usually quick to realize any gains and loathe to realize their losses, studies consistently show that long-term investors pay fewer taxes when compared to short-term investors.
Compounding
Reinvesting dividends and capital gains results in the purchase of more shares, contributing to greater investment growth. Reinvesting your profits and sticking to a discipline of not making withdrawals from your investment portfolio will magnify your returns over the long term.
Dividend-Paying Stocks and Long-Term Investing
A strategy of buying dividend-paying stocks to create income from investments on top of price appreciation is ideal for long-term investing.
The long-term investor can also choose to reinvest dividends which will go to buy more shares of stock, exploiting the power of compounding returns.
Invest With Bloom Investment Counsel, Inc.
Bloom Investment Counsel Inc. is a Toronto-based independent, privately-owned boutique investment management firm with over 38 years of experience, actively managing Canadian and U.S. dividend-paying equity portfolios. Bloom can assist you in establishing a long-term investment strategy to protect, preserve and build your wealth.
This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.