Investing can be daunting.

There are many factors that can impact financial markets at any time. Market volatility and fear can be caused by unexpected events, such as a pandemic. This may make it difficult for new investors to start investing.

It doesn’t take a lot of effort to put together a solid plan for investing if you are a young investor. You can think of investing like a marathon. By investing steadily over many years, with the right strategy you could increase your chances to reach your financial goals.

Here’s how.

Why should you invest in the long-term?

These are the three main benefits of investing long-term:

Potentially higher returns
Despite the fact that the stock market has been through crises like the US Subprime crisis and the European Debt Crisis, it tends not to rebound and trend higher.

The chart below, for example, shows the performance of MSCI All Country World Index. This index has been monitoring global equity performance since 1988. It’s simply a representation the global stock market. Stock prices have fallen in the short-term due to volatility and market recessions. However, the market could rise over time as the economy recovers.

The investment landscape has always had volatility. You might be able to ride the volatility better if you have a longer-term investment plan. The market rewards patience and persistence.

c) It’s less stressful

Stressful reactions to market events can lead to anxiety. You’d constantly wonder if it’s the best time to sell or buy your investments. Focus on the long-term and stay true to your investment strategy.

Stay the course with dollar-cost-averaging through unit trusts

It is important to focus on the long-term, but how can you put that into practice?

A dollar-cost average (DCA) strategy is the answer. This is where you invest a fixed amount at regular intervals, such as monthly or quarterly. DCA requires that you invest the same amount at the same time, regardless of whether prices rise or fall.

These two main benefits are:

Stay the course with dollar-cost-averaging through unit trusts

It is important to focus on the long-term, but how can you put that into practice?

A dollar-cost average (DCA) strategy is the answer. This is where you invest a fixed amount at regular intervals, such as monthly or quarterly. DCA requires that you invest the same amount at the same time, regardless of whether prices rise or fall.

These two main benefits are:

  • Emotions won’t influence your decisions. You don’t have to choose when you invest. This allows you to avoid making greedy or fear-driven investment decisions such as selling investments when they are low or increasing your investments when they are high.
  • When prices are low, you should invest. It can be difficult to decide whether to invest more at low prices, as it is possible to fear that they will fall further. You can still use the DCA method to buy more units or shares when prices are low. This will give you potential higher returns if the market rises over the long-term.

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