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Tortoise or hare? How long should I stay invested?

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Summary

Why staying invested could see greater rewards.

2 min read

Staying invested over a long period while ensuring your portfolio stays nimble to match market conditions could be the best way to achieve your goals.

Those looking at investing for the first time often wonder whether it should be a fast fling or firm commitment. We believe a long-term approach is best but with short-term changes when necessary so your investments are appropriately positioned whatever happens.

Markets rise and fall day-to-day but over time they generally reflect the long-term growth of the global economy. This means the longer you invest the more likely you are to weather periods of weakness and, potentially, achieve healthy returns.

To really get the best out of your investments though, it more-often-than-not helps to have an expert keep a close eye on market developments and position your portfolio accordingly.

This is what happens for investment clients at Coutts who don’t want to call the shots on a regular basis. Our team closely monitors markets and makes changes to our portfolios and funds in line with our views on what could maximise returns in good times, or help preserve them in bad.

For example, earlier in the year we reduced holdings in emerging markets in favour of developed markets, dominated by the US. This allowed us to capture the ongoing strength of the US economy while reducing the impact from falls in emerging market equity, which has suffered due to the strengthening US dollar.

There is still risk involved of course. There are no guarantees and you could lose the amount you originally put in. Even if markets performed well in the past that doesn’t necessarily mean they will continue to do so.

But on the whole, a well-managed, long-term investment can potentially deliver the healthiest returns in our view.

“We believe it is not about timing the market, but rather time in the market. Investing for the long term in high-quality, good value assets can help grow your wealth.”
Shanti Kelemen, portfolio manager at Coutts

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Live long and prosper

A long-term approach to investing is also becoming more relevant because we are all living longer. Office for National Statistics analysis from 2015 says that:

  • a woman retiring at 55 can expect to live for another 33 years on average
  • a man retiring at 55 can expect to live for another 31 years
  • there’s around a one in 10 chance that a man or woman of that age will live to 100

This means your pension fund and other savings will need to support you for many years to come – and a sound, long-term investment plan could help.

You could consider putting your cash in a savings account, which benefits from greater security and easier access. But with prices currently rising faster than the typical amount of interest you’ll receive, investing could be better for preserving – even enhancing – the spending power of your wealth over time. This is especially important as our research shows the prices of luxury goods and services are rising even faster than mainstream inflation.
 

Don’t fall foul of bad timing

It’s understandable to be concerned when markets take a turn for the worse and negative headlines abound. There can be a great temptation to pull your money out and shut your investment down.

But dips in market performance don’t necessarily mean the wider picture has become negative. Back at the start of February, for example, markets fell following concerns of interest rates rising sooner than expected in the US. This spooked investors but the reality was that the global economy remained in reasonably good shape and markets recovered steadily over the rest of that month.

Portfolio Manager Shanti Kelemen says, “We believe it is not about timing the market, but rather time in the market. Investing for the long term in high-quality, good value assets can help grow your wealth.

“Markets tend to go up and down in response to political news, regulatory changes and economic data, but at Coutts we look beyond short-term noise and instead focus on long-term economic fundamentals.”

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Past performance should not be taken as a guide to future performance. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment.

Investing over the long term could be the most effective way to make your money work for you and your family. There will always be ups and downs in markets, but a well-managed investment focused on the future can help you avoid the day-to-day noise and benefit from long-term economic growth.

About Coutts Investments

With unstinting focus on client objectives and capital preservation, Coutts Investments provide high-touch investment expertise that centres on diversified solutions and a service-led approach to portfolio management. Our investment process is as disciplined as it is creative – ensuring tailored solutions with robust results.

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