10 Best Long-Term Investment Strategies for 2023
Building wealth takes time. While short-term trading can be profitable for some, most investors are better off developing a long-term investment plan. The key is starting early and using time to your advantage through the power of compounding.
Here are 10 of the best long-term investment strategies to consider for 2023:
- Invest in Index Funds
Index funds provide instant diversification by tracking market indexes like the S&P 500. They offer exposure to hundreds of stocks in a single fund, while charging very low fees. Index funds also rarely underperform the market over the long run, making them a smart “set it and forget it” choice. Focus on broad market index funds like S&P 500 funds, total US stock market funds, and total international stock funds.
- Dollar Cost Average
Dollar cost averaging (DCA) is a technique that reduces market timing risk. It involves investing a fixed dollar amount on a regular basis, regardless of stock prices. For example, investing $500 monthly into a stock fund buys you more shares when prices are low and fewer shares when prices are high. This smoothes out market volatility.
- Reinvest Dividends
Reinvesting dividends automatically uses dividend payments to buy more shares of the stocks or funds you already own. This accelerates your compounding and builds your positions faster through the power of reinvestment. Many brokers offer automatic dividend reinvestment.
- Invest in Real Estate
Real estate investment deserves a place in a long-term portfolio. Options include rental properties, REITs (real estate investment trusts), and real estate crowdfunding platforms. Benefits include appreciation over time, rental income, and diversification.
- Consider Value Stocks
Value stocks trade below their actual worth and tend to outperform growth stocks over longer periods. Look for value stocks with solid fundamentals and a clear path to increased profitability. Focusing on value can boost long-term returns.
- Max Out Retirement Accounts
Retirement accounts like 401(k)s and IRAs offer unmatched tax-deferred compounding. The earlier you start contributing, the more growth you can achieve. Make sure to contribute enough to get any available matching employer contributions.
- Invest in Yourself
Consider investing in yourself by developing skills, education, and capabilities that will increase your earning power. Options include pursuing advanced degrees, technical skills training, and professional certifications.
- Maintain a Long-Term Mindset
Avoid reacting emotionally to daily market swings and news. Stay focused on long-term goals and stick to your investment plan. Time in the market beats trying to time the market.
- Diversify Your Portfolio
Diversification reduces portfolio risk by allocating across a variety of assets like stocks, bonds, real estate, and cash. Rebalancing periodically keeps your asset allocation on target.
- Automate Your Investing
Automate your investment contributions to enforce consistency. Set up automatic transfers from your bank account to investment accounts on a schedule. Investing discipline leads to long-term success.
The key takeaway? Start investing early, focus on low-cost index funds, reinvest dividends, and let the power of compounding work its magic. Patience and discipline will serve you well on the path to long-term investment success.
