How long-term investing can offer a sustainable return

Taking a long-term view means your portfolio can ride out short-term fluctuations in value

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The stock market can sometimes seem like a rollercoaster ride, but historically, it has delivered far superior returns over the long term when compared to other asset classes such as cash and bonds. If you've got a long-term savings goal, equities, whether held directly as shares or through a pooled fund i.e. a collective investment, could be an essential part of your portfolio.

Investing directly in equities can be a risky strategy if you don't properly do your homework. For many, it is important to avoid investing all of your money in just one company - the risks of losing everything are just too high. Instead, a collective investment, such as an open-ended fund or investment trust, could be worth considering. These 'funds' are managed by professionals who pool your money with other investors and spread it across a wide range of companies - thus spreading the risk and diversifying your investment. Typically, investors consider a basket of funds, so savings are diversified even further. Depending on your investment goals (for example, providing a decent level of income in retirement) it may be wise to consider a 'buy and hold' strategy: holding solid, sustainable companies with a long-term horizon, which could be a three to five year period (or longer), gives the investment time to ride out short-term market dips. Also regular saving schemes can help avoid buying at market peaks and averaging the cost of buying a particular stock or fund over a longer period of time.

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