Tuesday, September 16, 2008

Long Term Investment Goals

Regardless of the uncertain global economic conditions in the near term, investors should remain focused on their long term goals and make their money work harder and smarter. As the higher inflation is here to stay, investors will see the wisdom of moving some of their savings from low yielding investments to outperform the inflation rate.

Investors should keep their emotions from influencing their investment decisions. A disciplined and methodical approach to investing is the key to long term investment success. They will achieve better returns than those who engage in timing the market.
This approach entails buying and holding the investments for the medium to long term period of at least 3 years with portfolio rebalancing done on regular basis.

The buy and hold principle is based on the notion that a good investment will generate reasonably attractive returns. The advantage of this strategy is that it is easy to manage your investments once you have made them. You don’t have to time the market. Over time, the upward bias of the market will overcome and outweigh any temporary pull-backs in the value of your portfolio.

Investors who want to reduce market volatility are advised to practice dollar cost averaging (DCA) as this strategy enables investors to focus on the long term investment goals and not worry about prevailing level of the market. DCA is simply investing a fixed amount of money in a financial asset on a regular basis regardless of what direction the market is moving. By investing a fixed amount on a regular basis, investors will buy more units when the market is lower and fewer units when the market is higher. This strategy will produce a lower average cost of investment than the average price over any given period.

Conclusion – investors should have a disciplined perspective that focuses on achieving medium to long term investment goals. Focus on the long term horizon and refrain from over-reacting to the short term movements of the stock market.

"Failure is no reason to quit. Every failure gives us valuable information for future improvement" - Happy Malaysia Day!


CEC Since 1970 said...

Dear Wee,

Your blog is well done :)

Eng Chin

cheeweelan said...

Dear Eng Chin

Thanks for the kind words. Will definitely keep writing good and relevant articles. If you noticed, I am leaning towards investment theme. Staying away from politics as there are too many good bloggers in that field n also missus wants me to be around to raise the kids - dont want me to join Theresa n gang! he!he!he!

Razali Razman said...

Hi...good article. By the way, have you heard of fundsupermart.com? They are taking out lots of articles in the newspapers. I saw that their charges are very cheap. I wonder if there is a catch. Do yo think it will affect the normal sales channel?

Do tell me what you think when you have the spare time because I know you are going through a lot right now.

CheeWee said...

Thanks Razali, glad that u enjoyed reading the article.. Perhaps you can translate it and post it at yr blog. Took a quick tour of fundsupermart.com. Believe that's the way to go, like the rest of investment thingy. The dent on normal sales channel might be insignificant at the moment cause generally we Msians are still skeptical on online investment. Still prefer to be served! Will explore the site in due course.