Metis AM
Investing your wealth can be a great way to help it grow, especially during times of high inflation and low interest rates. Sometimes, however, it can be easy to feel impatient and start regularly checking the value of your portfolio to see how quickly it is rising.
Of course, just like “a watched pot never boils”, a watched investment never grows! In reality, investing is a long-term strategy, so while it can often deliver strong returns it usually does so over a period of years or even decades.
That’s why, if you ever feel impatient about the performance of your portfolio, it can be useful to think of it not as a 100-metre dash but rather as the London Marathon.
Taking time to prepare can really help your performance
Before you start your investing journey, one of the most important things you can do is to prepare carefully. Nobody becomes ready to run a marathon overnight, and it takes months of dedication and training before you’re able to tackle the real thing.
When it comes to building a resilient portfolio, the more preparation you do, the better. A good start is to analyse your monthly income and expenditure to work out how much you can afford to invest on a regular basis.
Given that the cost of living has risen sharply in recent months, as we discussed in a previous article, it’s more important than ever to know what you can afford to invest and what you should save.
At the same time, you should also take time to decide what you are building your wealth for. Just like how a runner sets a target time for a set distance, knowing your goal can give you an idea of where you need to be by each stage of your life.
Pacing yourself by investing regularly can help you to build your wealth effectively
For many marathon runners, the first few miles are often the most important as you need to pace yourself properly if you’re going to finish. In the same way, if you want to grow your wealth effectively then it can be useful to invest on a regular basis.
One of the main benefits of slowly drip-feeding your money into the stock market like this is that you can ensure you build your wealth while still ensuring you have enough to live your desired lifestyle now.
Furthermore, by pacing yourself you can actually protect your wealth from volatility by spreading out the risk of market dips. By making piece-by-piece investments, you can help to account for the peaks and troughs in the market.
This approach is known as “pound-cost averaging” and can help to reduce the risk of your whole portfolio losing value in one fell swoop if the market unexpectedly dips.
Focus on your long-term goal when the going gets tough
As any seasoned long-distance runner will tell you, the middle of the race is often the most difficult. No matter how well you pace yourself, this is the point where fatigue starts to set in, and your anxiety rises as you start to worry you won’t make it to the end.
This is often referred to as “hitting the wall” and it’s when most runners are likely to give up. When investing, it can be easy to get disheartened during a market downturn as you see the value of your portfolio fall.
Just as this pressure makes many runners throw in the towel, the shock of a downturn can tempt you into selling your investments. But while this may give you a greater sense of control, this isn’t always the right decision. Instead, it can be better to take a more long-term view of your finances.
During times of volatility, it’s important to remember that the general upward trend of markets usually smooths out any temporary dips. That’s why holding your nerve, even when the going gets tough, is often a recipe for success.
Of course, much like how the encouragement of a coach can help you to reach the finishing line when you’re struggling, the advice of a financial planner can help you when investing.
When you seek professional advice, you’ll receive personalised support, so you can grow your wealth much more effectively. For example, a planner can regularly review your progress, so you can be confident that you’re on track to reach your financial goals.
Get in touch
If you want to learn more about how working with a financial planner can enable you to invest more effectively, we can help. Please email enquiries@metiswealth.co.uk or call 0345 450 5670.
Please note:
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
