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Stick To Long-Term Investment Strategies
It is understandable that many investors are becoming disillusioned about investing in the share market. Particularly for those who have been investing over the last 5 years, it feels like one disappointment after another with returns continuing to disappoint. Even the most hardened investors could be forgiven for starting to question whether “investing for the long-term” is still a valid approach.
Added to this is the backdrop of continued uncertainty in Europe, slowdown in economic growth in China and emerging markets, and now questions being raised regarding the strength of the Australian economy.
History and investment fundamentals show however that over the longer term shares outperform other asset classes such as cash and bonds. While the current situation many seem unusual, economic commentators point to other periods in history where negative returns or market volatility have been the norm over long periods. In each case, the share market eventually bounced back.
It is understandable that some investors might succumb to the attraction to preserve capital by investing in cash or term deposits. With term deposits currently paying around 5%, bond yields at record lows, and interest rates likely to fall further, returns from these “safe” investments are far from exciting.
Compare these to Australian shares, many of which are paying dividends of 6% or more. There only needs to be a small increase in capital growth for shares to out perform other asset classes.
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