When it comes to building wealth, one of the most underrated yet powerful strategies is holding investments for the long term. As someone who is in the investment space and studied the behaviour of both new and seasoned investors, I’ve seen firsthand how long-term investing consistently outperforms short-term speculation.
In this blog, I’ll break down exactly why holding your investment long-term works, the emotional and financial benefits it brings, and how you, yes, even if you’re starting small, can confidently begin your journey.
What is Long-term Investing?
Long-term investing simply means staying invested for years, not months. It is the strategy of buying and holding assets, such as stocks, ETFs, mutual funds, or real estate, for several years.
This approach prioritises consistent growth and compounding returns over quick wins and market timing. It doesn’t rely on predicting daily price movements or jumping in and out of positions. Instead, it rewards patience, discipline, and a forward-looking mindset.
Why You Should Invest Long Term
- Compounding Returns are the Biggest Advantage of Holding Long-term
Compounding is when your investment earns returns, and those returns start earning returns too. Over time, this effect significantly multiplies your wealth. For example, investing $1,000 in a stock that returns 10% annually grows to $2,594 in 10 years but grows to $6,728 in 20 years, all without adding any extra money.
Short-term traders often miss out on this exponential growth because they pull money out too early, resetting the compounding cycle.
- Holding Long-term Minimizes Costs and Maximizes Profits
When you hold your investments, you reduce trading fees, transaction charges, and potential capital gains taxes (where applicable). Many platforms charge a fee every time you buy or sell an asset. Frequent trading does not only rack up costs but also increases the chances of making emotional, impulsive decisions.
In Nigeria, even though capital gains tax on stocks is minimal, long-term investors benefit from lower fees and fewer mistakes compared to active traders.
- Investing Long-term Helps You Stay Calm During Market Volatility.
Markets will rise and fall; it’s inevitable. But history shows they always recover. Investors who panic during a downturn and sell usually lock in their losses. Those who stay invested are the ones who benefit from the recovery.
Take the COVID-19 crash in 2020. Global markets dropped sharply but rebounded within months. Investors who stayed the course saw impressive gains, while those who sold at the bottom missed the recovery.
- Long-term Investors Benefit from the Market’s Best Days
Missing just a few of the market’s best-performing days can significantly hurt your returns. A study by JP Morgan found that missing the 10 best days over a 20-year period cuts returns in half. The problem? These best days often come right after big declines.
Trying to time the market means you risk missing these crucial days. Holding long-term ensures you’re always in the position to benefit.
- Long-term Investing Builds a Healthy Money Mindset
Holding long-term forces you to think in terms of decades, not days. This shift reduces the temptation to chase hype, helps you stay consistent, and teaches discipline.
You stop checking your portfolio daily, stop comparing yourself to others, and focus on your financial goals. That emotional stability can make all the difference over time.
- Diversification Makes Long-term Investing Safer.
Diversifying your portfolio means spreading your money across different asset classes, sectors, or regions. This reduces risk and improves the chances of steady growth.
A diversified long-term portfolio is better equipped to handle market volatility. Even if one sector underperforms, others can balance it out. That’s why seasoned investors always recommend diversification.
How to Start Long-term Investing as a Beginner.
Getting started doesn’t require a lot of money or experience. Here’s what to do:
- Set a clear goal: You need to clearly identify why you want to invest. It could be for retirement, buying a home, or your children’s education. Make sure you have a SMART goal.
- Pick a trusted platform: Use a reliable app like Trove to access both local and global markets.
- Start small: Even investing NGN 5,000 monthly can add up over time.
- Choose long-term assets: Go for stocks, ETFs, or mutual funds with strong track records.
- Automate your investments: Set up recurring purchases so you stay consistent.
- Ignore the noise: Don’t panic with every market move. Stick to your plan.
Read Also: What is Personal Finance and Why Is It Important?
Conclusion
Long-term investing is ideal for every investor. You just need a clear goal, a little patience, and the discipline to stay consistent. Holding your investment long-term makes it less risky, doesn’t require constant monitoring, and gives your money room to grow.
Trying to trade short-term without experience often leads to losses and burnout. But when you invest for the long term, you give yourself time to learn and improve while your portfolio does the heavy lifting.
The truth is, you don’t have to be the smartest person in the room to succeed at investing. You just have to stick with it. Long-term investing might not be exciting, but it works. It’s backed by data, history, and thousands of real-life success stories.
