Investing for the long term? The reasons to think about it now.
Investing for the long term is essential to maximise the growth potential of your savings, whatever the size of your savings. Here are the advantages of a long-term investment.
1 — Long-term investments help overcome market shocks
Over the past two decades, the world’s major economies with, no exception here in Europe, has experienced multiple economic downturns. However, in hindsight, these crises have taught us one thing – that long-term investment is more than worthwhile.
Although the Covid-19 infection curve is rising, global stock market indices may soon be able to climb back to pre-Covid levels.
The financial crises of 2008 also silenced the markets, but a recovery quickly followed and confidence in the financial markets has been restored.
Historical evidence suggests that long-term investment may be one of the best ways to survive a crisis.
2 — Long-term investments overcome volatility
One of the main concerns of any type of investment is market volatility.
Volatility measures the degree to which prices change over time. The greater and more frequent the price fluctuations of an investment, the greater its volatility. In addition, the greater the degree of risk.
Note, however, that short-term volatility does not necessarily indicate a long-term trend. Some investments may fluctuate greatly in the short term but show patterns of long-term growth or stability.
The advantage of investing for the long term lies in the relationship between volatility and time. Investments held for longer periods of time tend to have lower volatility than those held for shorter periods of time.
The longer you invest, the better you will weather periods of weak markets and the more potential your money has to grow.
Final advice: how to invest for the long term?
Once you decide to become a long-term investor, you will need to choose certain investments and strategies based on your risk tolerance and desired returns.
There are, of course, a thousand ways to invest for the long term: real estate, shares (a stake in the capital of companies), life insurance, pension savings, etc.
Generally speaking, diversification is a good thing, so you could divide your savings into these different investment categories. However, there is one that by its very nature includes this diversity: life insurance.
Life insurance policies enable you to mix euro-denominated products (with a guaranteed rate) and unit-linked products (with a higher potential return). These unit-linked products themselves are a mix of various financial market products.
By adding unit-linked products to your policy, you take a greater (but measured) risk compared to euro-denominated products, but in return, the long-term profitability is much better.
Unit-linked productsUnit-linked products allow you to invest in the financial markets, through shares or bonds, without having to purchase these assets yourself. With them, you diversify your savings, increase the return and reduce the risk of loss. Unit-linked products are backed by life insurance policies.
You don’t need to know the markets to make your choice: life insurance professionals offer unit-linked products adapted to your needs.