A saver who puts money aside with a long-term perspective in order to be able to face difficult times, if necessary, is much more likely to achieve his goals than one who seeks to ” speculate ”in the market in search of immediate gains.
The longer you invest, the more your initial investment is likely to benefit from the effect of compounding. Many investors are already familiar with the notion of “capitalization” through their savings account. Funding is the process by which interest is added to your original investment and which in turn generates other interest. Over time, this can make a huge difference, as long as you reinvest your profits.
Take valuations into account
Whichever approach you choose to invest, it is important not to pay more than necessary for the sustainability of a company’s earnings or its prospects for growth. In our view, follow a so-called bottom-up or bottom-up strategy (each company is judged on its own merits, and not on sector or economic conditions) using a rigorous approach centered on fundamentals companies to identify the most suitable stocks for your portfolio is a great way to invest. Everything is a matter of patience. You have to wait until the best opportunity arises. We believe that putting your money in the right business at the right price can often make more sense than investing in the right business at the right price. For the key investment terms this is important.
Focus on real performance
Inflation, taxes, and fees (such as transaction costs, arbitrage and annual management fees) are three of the factors that can negatively impact the actual rate of return on your investment. There are some options to reduce costs, including instruments that provide protection against inflation, such as inflation-linked bonds (debt securities whose principal value and interest paid are linked to a specific price index, most often the Consumer Price Index). Another alternative is commercial real estate where rents are often increased at the same rate as inflation to take account of rising prices.
Spread your risks
Holding a diversified portfolio of investments that are weakly correlated with each other can help reduce risk compared to investing in a single asset or market, as well as other less noticeable dangers such as inflation, which can have the consequence of eroding the value of the assets in the event of acceleration. Stocks, bonds (debt securities generally issued by a company or a State, at an interest rate usually fixed and for a given period, at the end of which the debt is repaid), real estate and cash react differently depending on market conditions. Opting for several asset classes can therefore avoid seeing the value of all your investments go up or down at the same time.