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How often should you check your long-term investments?

When you’re investing your money, it can be tempting to monitor its performance with military-style surveillance. And now you can manage your wealth on your phone, it’s easy to listen to, analyse, and react to the market within seconds.

Investing is personal and, as you’re saving for your future, it carries a lot of emotion. But this regular monitoring of your portfolio can be stressful and force you to make knee-jerk reactions to temporary market movements, which can leave you worse off in the long-run.   

Life is a roller coaster

The financial markets are often compared to a roller coaster, with increases in value swiftly followed by declines – a view that can be reinforced by media rhetoric.

It’s normal to be nervous when you come to invest your hard-earned money. But this volatility that evokes fear in so many, is a necessary component of financial investments – it’s what drives the value of our holdings up, as well as down.

As financial markets don’t exist in a vacuum, this volatility is influenced by the performance of the investment itself, as well as economic and political events. This exposure to risk can put nerves to the test if investors aren’t matched to the right invest strategy.    

Long-term benefits

It’s possible to adopt highly speculative investment strategies in the hope of taking advantage of short-term investment trends. Savers looking to protect and grow their wealth for the future, however, are advised to look to the longer-term horizon instead.

Take a look at the two tables below. The first graph shows the performance of an index; you’ll notice it’s hard to outline a clear trend as the performance is erratic. Sudden increases in value are soon followed by steep declines.

Now look at the second graph. You’ll notice that this graph looks quite different, with a definite growth trend represented on the graph. There are still moments of volatility, but these are part of a medium-term trend that carries momentum upwards.   

What’s the difference between the two investments? There isn’t one. It’s the same S&P500 index reflected in the chart, what’s different is the time frame. Where the first index reflects a six-month view, the second shows five years.

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By making an investment, your capital is at risk.

By changing the perspective of time, an investment that looks highly volatile and with no clear trend turns into a more stable investment with a clear upward trend.

Invest with confidence

Clearly, time is crucial when you’re investing. Adopting a long-term horizon helps you build a well-balanced portfolio that can manage the volatility within it by offsetting losses with gains made elsewhere. This also allows any investor to benefit from long-term growth trends.  

More importantly, if you’ve got a well-diversified portfolio with a long-term horizon, you shouldn’t be anxiously checking your investments on the beach when you’re on holiday, or getting up in the middle of the night to monitor global markets.

You’ll still want to know how your investments are performing, of course, but you’re less likely to regret any knee-jerk reactions with a long-term strategy. Instead, any portfolio adjustments will be based on thought-out assessments and careful analysis.

We encourage you to invest for your goals and in a way that suits your risk profile. It’s important that you can grow your money for your future, without it taking its toll on your emotions. But you should also have the power to check your investments as often or as little as you like.

That’s why you can access your personal Moneyfarm investment platform at any time and contact our team of consultants as you wish.

You’re building up your investments for your life goals, it’s important you live your life while you do it.

 

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