A long-term investment strategy is about connecting the way your money is invested with your goals, timeframe and comfort with risk. For Australians, this can involve superannuation, shares, property, cash and other investments.
There is no single investment strategy that suits everyone. What matters is understanding how the different parts fit together and whether they continue to reflect what you are trying to achieve.
Long-term investing generally means investing with a timeframe of several years rather than making decisions around short-term market movements.
The Australian Government’s Moneysmart investing guide suggests considering your financial position, goals, timeframe and attitude to risk when developing an investment plan.
That matters because investing for retirement may require a very different approach from investing for a goal only a few years away.
A long-term strategy gives those decisions context. Instead of asking “Which investment should I buy?”, the more useful question may be “What am I investing for, and how does this fit with the rest of my finances?”
PictureWealth’s guide to long-term financial planning explores how your investments can connect with the broader financial picture.
Before considering individual investments, it can help to define what the money is ultimately for.
That could include:
Your timeframe matters because different investments carry different levels of risk and can behave very differently over shorter periods.
The clearer the goal, the easier it becomes to assess whether an investment strategy still makes sense for what you are trying to achieve.
Investment risk is not only about whether market movements make you uncomfortable.
It can also include whether your broader financial position gives you enough capacity to deal with periods when investments fall in value.
Income stability, debt, savings, upcoming expenses and your investment timeframe may all influence the amount of investment risk that is appropriate for your circumstances.
This is why two people with similar incomes or ages may still take very different approaches to investing.
Diversification means spreading investments across different assets rather than relying heavily on one company, industry or market.
The Moneysmart diversification guide explains that diversification can occur across asset classes, individual investments and geographic markets.
A diversified portfolio might therefore include exposure to areas such as Australian shares, international markets, fixed interest, property and cash.
Diversification does not remove investment risk or guarantee positive returns. It may, however, reduce the impact that poor performance in one part of a portfolio has on the whole.
It is also worth looking beneath the number of investments you hold. Several funds or shares can still leave you concentrated if they have similar underlying exposures.
For many Australians, superannuation represents a significant part of their long-term wealth.
Yet it can sometimes be treated separately from other investments.
Your super fund may offer different investment options, which can vary in their mix of growth and defensive assets, risk levels, fees and investment approach.
Moneysmart provides an overview of super investment options and the factors worth understanding when comparing them.
Rather than looking at super in isolation, consider how it fits alongside your personal investments, debt, cash flow and retirement goals.
PictureWealth also explains some of the areas worth considering when asking whether your current super strategy still fits.
An investment decision rarely affects only your investments.
Money directed towards one goal may reduce what is available for another. Debt repayments can affect investment cash flow. Insurance can influence how exposed your finances are if circumstances change. Super may support long-term retirement goals but generally has restrictions around when money can be accessed.
This is why looking at the entire financial position can be useful.
PictureWealth’s guide to financial planning for uncertainty explores how different parts of your finances can work together when conditions change.
Markets move constantly.
Interest rates change, individual sectors rise and fall and economic headlines can quickly shift between optimism and concern.
That does not necessarily mean your long-term investment strategy needs to change each time.
Instead, market movements can be a prompt to revisit the reasons behind your strategy.
Consider whether your goals have changed, your timeframe is different, your ability to take risk has shifted or your current investment mix no longer reflects your broader position.
Keeping your finances organised can make those reviews easier. We have more practical guidance on staying across your finances between adviser reviews.
A long-term investment strategy does not have to remain unchanged forever.
Your financial position can evolve considerably over time.
Changing jobs, buying property, starting a family, receiving an inheritance or approaching retirement may all change what you need from your investments.
A review can help establish whether your goals, risk position, asset mix and broader financial strategy still align.
The important distinction is between reviewing because your circumstances have changed and reacting simply because markets have moved.
How do super, investments, debt, and insurance fit together?
These areas can influence one another.
Your debt affects available cash flow. Your investment strategy can affect how much financial risk you carry. Your insurance can help manage certain risks to your broader position. Your super forms part of your longer-term retirement planning.
Looking at them together can provide a clearer picture than treating each decision separately.
That connected approach is central to holistic financial planning.
What is the best long-term investment strategy in Australia?
There is no single strategy that is best for everyone. An appropriate approach will depend on factors including your goals, timeframe, financial position and tolerance for investment risk.
Is diversification important for long-term investing?
Diversification may help spread investment risk across different investments, asset classes and markets. It does not eliminate risk or guarantee returns.
Should super be included in my investment strategy?
It may be worth reviewing your strategy when your circumstances, goals, timeframe or financial position change. A review does not necessarily mean changes are required
Can a financial adviser help me with investment planning?
A financial adviser can provide personal advice based on your circumstances and may help you understand how investments fit alongside super, debt, insurance, cash flow and other financial goals.
If you are unsure whether professional guidance could be useful, read 7 signs it might be time to speak with a financial adviser.
Long-term investing is about more than choosing individual investments.
Your goals, timeframe, risk, super and broader financial position can all influence what is appropriate for you.
If those decisions are becoming difficult to connect, a PictureWealth financial adviser can help you understand your financial position and consider your options as part of a holistic financial plan.
Important information
This information is general in nature and does not take into account your objectives, financial situation or needs. Consider whether the information is appropriate for your circumstances and seek professional financial advice before making financial decisions. Past performance is not a reliable indicator of future performance.