Starting to invest in anything — stocks, bonds, real estate — can be a very challenging time. Unless you have already studied finances and understand how the markets work, you will find yourself at a complete loss.

Nonetheless, the rewards are promising. Long-term investments can turn into a fantastic retirement fund, a decent nest egg, or even a hobby you look forward to every day. There are several key principles you need to bear in mind, though, in order to ensure you don’t end up losing more than you can afford.

Plan to Be in It for a Long Time

First of all, give up on the idea of getting rich overnight. If that’s your goal, then you will need to either take more risks or find another way to earn your money.

Long-term investments are meant to be as safe as possible, only slightly volatile (more on that later), and not a get-rich-quick scheme. Any money you invest today may start to make more money in a year’s time, but you should plan to cash in later, in a decade or so.

This means two things:

  • Only invest the amounts you can live without in the present.
  • Make some long-term life plans, as opposed to short-term ones that need an influx of cash in the near future.

Emotions Have Nothing to Do with It

Emotions can cripple even the best investment strategies and should be dealt with as efficiently as possible. Don’t expect yourself not to get emotional: that’s practically impossible. There will be opportunities you may want to take, market crashes and fluctuations, and other people getting on your nerves. You are bound to get emotional.

Instead of trying to stave off the emotions, learn how to cope with emotional investing. Learn to understand when your emotions are taking over your logic and reason, and find a way to get back to your pre-planned strategy. You can either step away completely until you cool off or rely on a third party to help you see what the best course of action is.

Understand That Loss Is Inevitable

No investment journey is crash-free. Markets that seem perfectly healthy and stable can go berserk practically overnight, and not even the savviest financial brains can always predict when this will happen.

What you need is a backup plan for when things get tough. What we have learned from the past is that even markets that crash climb back up again, bringing positive returns after a couple of years. Instead of bailing at this point, consider investing or just holding your ground.

Also understand that you will lose money at some point. The important thing is not to panic. Instead, you’ll want to have a strategy in place to combat this loss.

Diversify Your Portfolio

Putting all of your eggs in one basket, so to speak, can quickly turn out to be a disastrous idea. Even if you earn big today, the investment you’ve made can go belly up tomorrow.

A diverse portfolio can be a great way to go. Have some blue chip stocks in your portfolio, as they are the most likely to bring in a steady return over the long term. Penny stocks can earn you more money as long as you know when you may need to trade them in.

NFTs and cryptocurrencies are more volatile, of course, but they can also be a prudent investment if you understand at least the basics of blockchain.

Don’t Act Out of Fear

If fear and greed are the main driving forces behind your investment, you will end up losing more than you can afford in the long term. Markets will crash, and if you pull all of your chips off the table, you will only cause yourself too much stress.

When you notice a market is fluctuating, don’t act out of fear. If you hear a rumour about one of your investments going south, don’t believe it straight away.

Educate yourself about your investments and act with confidence. If you make the wrong choice, it should be because of your own error in judgment, not because you jumped the gun.

Monitor Your Progress

At least once every year, but ideally every six months or so, take a look at your entire portfolio with fresh eyes and completely objectively. Your asset allocation may have shifted from its original balance, and you may now need to reallocate some of them to match your new circumstances.

For example, if you get married or divorced, if you have a baby or get a raise, you will need to rethink your investments and make sure they are still in line with what you originally planned.

Also, check how each individual investment is doing, what the returns are, and if you may need to shift some money around.

Have a Clear Goal and a Clear Plan

Finally, make sure your investment strategy matches your life goals. Figure out why you want to invest, what you want to achieve, and how much time and effort you want it to involve. This will help you keep your investments in check.

Once you have this goal in mind, come up with a step-by-step strategy. Don’t just wing it as and when you learn more. Start by educating yourself, and only then start investing. Stick to the plan, but make sure you keep adapting it to the changes in the financial world. After all, no one could have predicted blockchain 50 years ago, so there is no way to predict what investment opportunities may be in store.

Wrapping Up

A long-term investment strategy will grow and adapt as you become a more experienced investor and as the market keeps evolving. As long as you keep your cool and trust your logic more than you trust your gut, you can reach retirement age (or any age you have set for yourself) with the amount of money you’ve planned to make.