4 Tips for Making Smart Long-Term Investments

Discover tips for securing your financial future!

Different banks offer nominal rates of interest within their different savings accounts. Unfortunately, just leaving your money in a bank account for the long-term is not enough. Your money will be losing its value because the interest rates are so low compared to inflation rates. On the other hand, various financial markets offer more promising returns, but many people avoid them because of the element of risk. Additionally, those that do invest, try to beat the market; they enter at the top and sell at the bottom. At TradeMatrix, we're here to help you navigate these financial markets by providing you with the tools to succeed and connecting you with like-minded investors to learn from. Here are some tips to help you successfully invest in these markets and build an extensive investment portfolio over the long term.

An image of a diverse trading market through TradeMatrix’s investment app.


Healthy diversification could include investing in a wide variety of markets, industries, and geographic locations to name a few. Diversifying your investments is essential to long-term growth as it protects your hard-earned money by limiting your risk. A good rule of thumb is that no single investment should be more than 10% of your total portfolio.

Some examples of different markets include the stock, bond, crypto, or commodity (oil, gold, etc.) markets. Why is it important to spread your money across multiple markets? If one market crashes another market may rally. A common strategy for diversification within the stock market includes spreading your funds to buy shares of multiple companies, mutual funds, and exchange-traded funds (ETFs). If you’re investing in the crypto market, make sure to spread your money across multiple coins and currencies.

An example of diversifying across industries would be holding investments in different economic sectors at the same time, such as technology and agriculture. To invest in various geographic areas, invest in companies and markets across multiple countries.

The easiest way to diversify across different markets, industries and geographic locations is through financial instruments within the stock market, such as managed ETFs and mutual/index funds that invest in these varying markets for you. With one easy transaction, you can diversify your investments by utilizing funds that have managers who invest in commodities, cryptocurrencies, economic sectors, or foreign countries among many others. There are many ways to diversify your investments and you should pick at least one strategy to protect your hard-earned money in the long term.

Not sure where to start with diversification? Download the TradeMatrix app to see how other investors are succeeding in this area.


Do Your Research

Diving into any financial market blindly will likely result in losing your money. This is gambling, not smart investing. Ensure you research how these markets work and put your income into investments with products and business strategies that you understand and believe in. Research financial reports and competitors. Review charts of the holdings' price change over various periods of time. Read press releases and news articles. Do your research and feel comfortable investing in a holding before you actually invest. Even though past performance does not guarantee future performance, a good place to start is by investing in holdings that have been doing well over the past few years rather than holdings that have been struggling.

There are countless resources to perform this type of research and investors often find it difficult to know what the most reliable sources are. By using the TradeMatrix app to follow investors you trust, you can learn what resources others rely on for their research and see their proven investment history.


Run the Stars and Sell the Dogs

In a nutshell, running the stars and selling the dogs means you should monitor your investments and compare their performances against different market indices. If some of your holdings do well, hold on to those and “run the stars.” Alternatively, you should “sell the dogs” that significantly underperform the market. Different examples of market indices include the NYSE Composite Index, the Nasdaq-100 Index, and the most popular one, the S&P 500 Index. A market index consists of numbers representing weighted values of various components like shares, bonds, commodities, or prices of goods. For example, the S&P 500 Index measures the performance of the 500 largest companies listed on the US stock exchanges in any given year. Many investors use this as a benchmark for the overall performance of the stock market at a given time. Don't try to time the market, in the long-term you will lose. Instead, "run the stars" on the investments that consistently perform well, and "sell the dogs" that consistently underperform these market indices.


Reinvest dividends

A surprisingly large part of the overall growth in most portfolios comes from reinvested dividends rather than in appreciation of holdings. In the stock market, dividends are payments a company makes to share profits with their shareholders. Dividends are one of the ways investors earn a return from investing in stocks or funds. Some investors' primary investment focus is to utilize high dividend holdings in their portfolio to generate passive income. They find stable stocks or funds with a long history of high dividend payouts and invest their money into those. Utilize our app to see how others are succeeding in building long-term wealth with their high dividend holdings. It may not seem like much, but holding investments that consistently pay a yearly dividend accumulates over time. After 5, 10, or 20 + years, these payouts compound into large amounts.

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Join our community today and get all of the ins and outs of today's stock and crypto markets, providing you with the knowledge to make smart investments over the long term. Have a question? Contact our team today!

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