What Does it Mean to be a "Long-term" Investor?

During times of market turbulence, you may hear how important it is to stay focused on the long term. But what, exactly, does it mean to be a long-term investor? And what can you do to become one? To begin with, you need to set your long-term goals. For most people, these goals revolve around retirement. What sort of retirement lifestyle have you envisioned for yourself? Will you work part- time? Travel? Live in a vacation home for part of the year? After you've clarified your goals, you need to quantify them. How much money will you need? You don't need to know the precise amount, of course, but you should come up with a good estimate. And, once you've got a number in mind, you'll need to determine how much you have to save and invest each year to reach that figure. A qualified financial professional can help you develop an investment strategy that meets your individual needs, goals, tolerance for risk and time horizon. But if you're going to be a successful long-term investor, you need more than that. You need discipline. You need patience. And you need the ability to persevere in the face of adversity. What actions can you take to develop these traits? Consider the following suggestions: Always keep your goals in mind. Every time you make an investment decision - no matter how seemingly insignificant - think about why you're investing. You may even want to use some visual ``cues.'' For example, if you want to retire early, print your projected year of retirement on a card - and keep it on your desk. If you want to own a vacation home, cut out a picture of a house on a beach, and paste it on a folder containing your investment information. These types of things may sound simplistic, but they can serve as valuable reminders of what you want to accomplish. Ignore distractions. Basically, once you've established your personalized investment strategy, everything else is a distraction. Headlines about corporate accounting scandals are a distraction. Steep, short-term market plunges are a distraction. Your neighbor's tip on a ``hot'' stock is a distraction. They're all distractions - and there are hundreds and thousands more of them out there, too. If you can train yourself to ignore all these annoyances and focus exclusively on what you need to do to meet your goals, you will be putting yourself in the strongest possible position to get the results you want. Chart your progress - but not too often. Clearly, it's essential that you know the headway you're making toward your objectives. But many people make the mistake of ``checking their progress'' far too often. Unless you're constantly buying and selling 3–4 which you wouldn't do if you were a true long-term investor - there's really not much point in reviewing your portfolio every day, week or month. If you're always studying your investments' performance, you are unquestionably going to see things you don't like - and you might be tempted to make unwise changes. In other words, don't waste time studying reams of “snapshots.” Instead, give the “big picture” time to develop. However, you may want to meet with your investment professional for a portfolio review at least once a year, or whenever you face a major change in your life or your financial situation. As you can see, it's not always so easy to be a long-term investor. But, in the final analysis, the effort is well worth it. -This article is provided by Jeff Foster, the Edward Jones Investment Representative for Seymour, TN.