5 tips for successful long-term investing

Ideally, investing shouldn’t be a gamble. Long-term investing requires planning and patience, and if you remain invested, you have a better chance of riding out market ups and downs which could be as exciting as a win at the casino.

If you’re prepared to be in for the long haul, here are some tips for how you can give your money time to grow.

Invest and forget

A set and forget investing strategy is a simple one. It involves leaving your investments to grow over time whilst avoiding the temptation to change things up by frequently buying and selling.

It’s also best to try not to check your investment value too often if you’re investing for the long term. Reviewing your investments too regularly may result in unnecessary nervousness which may drive you to act emotionally, rather than rationally. While it can be difficult at times, your patience could be rewarded.

If you choose a managed product, this will be reviewed for you by the investment manager to make tactical adjustments whilst still remaining in line with the long-term investment objective.

Invest little and often

Investing over the long term isn’t just about putting a lump sum in at the start and then forgetting about it. If you truly want to take full advantage of your investments, it could be sensible to invest small sums regularly over time.

This is known as 'pound cost averaging', and over longer periods it can help level out the highs and lows of the market. In fact, over time, you could benefit from market volatility, although it should be remembered that there are risks associated with investing and you could get back less than you put in.

Don’t put all your eggs in one basket

When looking to invest for the long term it’s worth considering ways to lower your overall risks. One way to do this is by putting your money into different investments, rather than putting all your money in one place. This is what is known as ‘diversification’.

By not putting all your eggs in one basket, investments that perform well in a diversified portfolio will likely balance other investments that may not be performing as well. This could provide a degree of protection against major losses to your money and investments.

Read more:The importance of diversification

Take tax into account

The amount of tax you’ll need to pay will depend on how much you’re investing, your income, and what you’re investing your money in. In the UK, there are two main types of tax. If you receive any interest or dividends on your investments, you may need to pay income tax if it exceeds your personal allowance (of £12,570 in 2023/24). Also, based on the 2023/24 tax year, if the profit you make when you sell your shares or investments exceeds £6,000, you will pay Capital Gains Tax (CGT) on the additional profits.

There are ways to reduce the tax you pay on your investments, such as by using an Individual Savings Account (ISA) which is free from most tax. With a Stocks and Shares ISA, you can invest up to £20,000 each year, and you are not required to pay tax on any gains you make, meaning you get to keep more of your returns.

Read more:3 reasons to invest in a Stocks and Shares ISA

Review your plan regularly

Change is often the only certainty in life, so it’s important to review your financial plan regularly to ensure that your investments are still on track and aligned with your goals.

How often you choose to review your plan depends on your individual circumstances, but once a year is about right for most people. Over time your situation may change. Whether that’s the income you earn, your family dynamic or even the level of risk you’re willing and able to take. All of these changes may impact your investment choices and so a regular review is recommended.

In summary, investing for five years or more allows for long-term growth, which is more important than shorter term dips in value.