How to Be a Successful Long-Term Investor

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“The stock market is a device to transfer money from the impatient to the patient.” — Warren Buffett.

How can you become a successful long-term investor? What separates highly successful investors from the majority who achieve average and below market returns? It is not pure luck but the disciplined adherence to a long-term investment plan and the application of that plan through consistent investment habits. This article provides tips to help you become a successful long-term investor.

1. Have an Investment Plan

The first and most important step towards becoming a successful long-term investor is to establish a long-term investment plan that is comprehensive to your current financial situation and future financial goals.

An investment plan is necessary to document your long-term goals and to provide you with ongoing strategies to keep you on track in achieving those goals. Your plan will define your healthy investment habits, provide you with focus and keep you on your investment course.

Without an investment plan it would be very difficult to be a successful long-term investor — adhering to such a plan could be the difference between building your wealth and losing everything overnight.

2. Save and Invest Regularly

Unless you are one of the lucky few that receives an unexpected inheritance or a large bonus payment (forcing you to choose between investing the lump-sum all at once or spreading your investment over a period of time to achieve dollar-cost averaging), then the amounts you invest will most likely be a portion of your monthly income.

Saving and investing need to be part of your monthly budget. Make this regular and make it a habit. How much? That is determined by your investment plan.

Successful long-term investors save and invest regularly, forgoing gratification today for greater rewards tomorrow.

3. Diversify Your Investments

The benefits of diversification come from spreading your money across a number of different investments.

For example, rather than treating the market as a lottery and throwing all your money into the one stock you think will go up the most, spread your investing capital among a number of stocks. You should select those stocks after carefully considering your risk tolerance and long-term investment goals, which have been identified as part of your long-term investment plan.

A well-diversified group of investments helps to dampen the ups and downs of your investment returns relative to specific securities and market sectors. Successful long-term investors are always adequately diversified to weather shorter-term market volatility.

4. Check Your Emotions, Turn Off The Noise

Successful long-term investors have a long term outlook for each stock they invest in and tend to be less emotionally responsive to external media and day-to-day market volatility. Instead they focus on the long term trends for the specific industry and pay particular attention to valuations and forecasts.

“The investor’s chief problem — and his worst enemy — is likely to be himself. In the end, how your investments behave is much less important than how you behave.” — Benjamin Graham.

Our emotions can make us bad investors, and subject to media-induced reactions. The everyday ups and downs of the markets can trigger greed and fear and cause momentary abandonment of the investment plan. The resultant collateral damage of inadvertent market timing can result in irrecoverable losses.

Successful long-term investors are oblivious to their emotions and investment market noise.

5. Stick To Your Plan (Invest Long-Term)

The most successful investors are disciplined and stick to their investment plan. They know that time in the market beats timing the market. They are always focused on the long-term.

Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.” — Albert Einstein.

Successful long-term investors make the most of their investments and exploit the benefits of compounding by remaining invested in the right, carefully chosen stocks. The longer money is invested in the market the more it can grow and the more the investment gains can compound.

6. Keep Your Investment Knowledge Up-to-Date

Last but not least, knowledge is power in investing, and this power requires you to stay up-to-date about the financial markets and your investment choices.

Here are some tips to improve your investment insights:

  1. Stay up-to-date with the markets by reading the financial section of the news. What is moving? What is influencing the moves? Instead of just focusing on what’s “new” or what has “just happened,” think about what the long-term trend is. Be sure to look at a bigger cause-and-effect picture. Most importantly, make sure that the information comes from a trusted, verifiable source as it may be misinformation and/or fake news.
  2. Don’t chase a hot tip. Beware of investor herd mentality.
  3. Behind every stock is a company. Understand the company that you are investing in and remember why you chose to invest in it — if you do not, you may face a difficult time staying firm when headlines react.

Don’t forget, however, that frequent trading can be correlated to underperformance in a world of information abundance, therefore it is important to tune out the noise from the financial media and be a disciplined investor with conviction in your investment decisions supported by research and analysis.

Successful long-term investors review the available information to stay up to date and revise their long-term decisions, whilst resisting short-term pressures to buy or sell.

Successful Long-Term Investors

“Invest for the long haul. Don’t get too greedy and don’t get too scared.” — Warren Buffett

Most often, successful long-term investors are those that avoid the day-to-day noise of the investment markets and media. They adhere to their long-term investment strategy in accordance with their investment plan. They apply long-term investment disciplines that become regular investment habits.

“We are what we repeatedly do. Excellence comes not from our actions but from our habits.” — Aristotle.

Preserve and Build Your Wealth with Bloom

At Bloom Investment Counsel, Inc., we are true active, long-term investors. We specialize in creating customized investment portfolios to help clients protect, preserve and build wealth through capital appreciation and dividend income — an overall total return approach to investing.

Established in 1985, Bloom Investment Counsel, Inc. is a Toronto-based independent, privately-owned boutique investment management firm with over 36 years of experience managing in excess of $2.5B in assets over the years. With a disciplined decision-making process built on nearly four decades of investment management experience, we have transformed the lives and capital of clients throughout Canada. Our clients include wealthy individuals, family offices, foundations, corporations, institutions and trusts.

If protecting, preserving and building wealth by creating your own investment portfolio is too time-consuming or daunting, let a professional investment manager help you with the hard work. Visit Bloom’s website to learn more about our investment approach or get in touch to find out what we can do to help you protect, preserve and build wealth without risking your future security and legacy goals.

Bloom Investment Counsel, Inc. is a well-established Toronto-based independent, privately-owned boutique investment management firm providing customized, actively managed, Canadian and U.S. dividend-paying portfolios for wealthy individuals, family offices, foundations, corporations, institutions and trusts.

Founded in 1985, Bloom has experience in managing in excess of $2.5B in assets over the years. We believe that generating independent cash flow is central to the success of our clients’ portfolios because it provides capital for the present day, if needed, while continuing to preserve and build wealth for the future.

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This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.