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Those who delay investing for years often confuse needs with wants. “Cellphone bills, cable TV packages and automatic services of all kinds gradually become necessities, and the would-be investor never jumps out,” says Stig Nybo, president of U.S. retirement strategy for Transamerica Retirement Solutions in San Francisco. “Investing takes discretionary income, and discretionary income takes discipline. Question those things that have become the norm but may not be necessities.”
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The biggest risk in investinginvolves needing your money at the wrong time, says Harold Evensky, a professor of practice in the personal financial planning department at Texas Tech University. “By balancing any funds you’ll need in the next three to five years, or roughly an economic cycle, between a money market account and high-quality, short-term bonds, you won’t have to sell your investments at a loss. You’ll have liquid funds available when you need them, even if the market has crashed.”
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Zack Shepard, vice president for Matson Money in Phoenix, unabashedly calls stock investments “one of the greatest wealth-creation tools known to mankind. Investors need them in their attempt to grow their portfolio and outpace inflation.” Even with some moribund stretches lasting through the 1960s and 70s, the Standard & Poor's 500 index has produced an average 20-year return of 7.25 percent if you look at all 20-year periods dating back to 1926.
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Horror stories abound of investors too tied to a particular stock or other investment, says Jimmy Lee, founder and CEO of the Wealth Consulting Group in Las Vegas. “Diversifying across asset classes as well as within asset classes is a smart way to go. For example, equities come in different flavors when it comes to characteristics such as market capitalization, U.S. versus foreign or growth versus value. Though it doesn’t ensure a profit or protect against a loss in a declining market, being diversified provides the potential for a smoother ride,” he says.
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In a large number of instances, portfolios need tweaking with time rather than a complete overhaul, which nervous investors too often resort to during down market cycles. “Investing is a long-term activity, not a sporting event with minute-by-minute adjustments,” says Dave Rowan, founder and president of Rowan Financial LLC in Bethlehem, Pennsylvania. “Treat it as such, and make small, infrequent adjustments to your investing strategy rather than trying to time the market.”
http://money.usnews.com/money/personal-finance/mutual-funds/slideshows/10-long-term-investing-strategies-that-work
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