Making the most of your investments: why do you need to be patient?

Patience is the mother of all virtues, and when it comes to investing, it's not just an adage! While investing is often profitable, it is rarely a process that fills your portfolio overnight. 

Unlike saving, which is a means of securing your money for the present or the near future, investing is a choice of financial placement with a view to reaping benefits over the longer term. The percentage return will depend on the rate of return on your investment, your type of investment and your ability to replenish your portfolio regularly. Why is it important to be patient if you want to get a good return on your investments?

PROFITABILITY IS BASED ON YOUR INVESTMENT HORIZON

Rome wasn't built in a day! Investing means committing part of your money to an economic investment or a financial instrument in the hope of earning a return, usually over several years. Yes, investing is a gamble based on risk: the greater the risk, the higher the expected return. Before embarking on an investment project, the most important thing is to establish your short-, medium- and long-term objectives. Do you want to buy a house in the next few years? Would you like to invest your savings in the stock market or provide yourself with a supplementary income when you retire?

To estimate the expected rate of return, assess your financial situation and the volume of payments you can afford to make over a given period of time. Depending on your objectives, different investment horizons are possible:

Short- and medium-term investments

With maturities of between 1 and 5 years, short- and medium-term investments are fast-moving. Life insurance, crowdfunding or PEA (Plan d'Épargne en Actions): these investments provide investors with liquidity and allow them to withdraw sums within a few days.

Long-term investments

Generally speaking, long-term investments offer the highest returns and are viable after 5 years. In fact, the longer the investment period, the more it helps to smooth out fluctuations in the financial markets. If you don't have a defined objective and you don't need money right now, aim for a long-term investment plan such as stock market shares or buying property!

IS INVESTING FOR THE LONG TERM GOOD FOR THE FUTURE?

Your retirement, your children's education, buying a country house for the holidays: all these projects that don't concern you today nevertheless take a long time to finance. Patience and long-term investment are the keys to financing your plans for the future.

1. Investing for the long term allows you to cope with market fluctuations

Statistics show that investors who invest in equities for more than 15 years enjoy more profitable returns. This is because the 'volatility' effect of the financial markets diminishes significantly over the long term: the market's ups and downs are less pronounced. The value of shares increases over the years, while falls in value (compared with the purchase price) decrease. Even in the event of a market downturn or "stock market crash", if your share has been invested for some time, there is very little risk that you will lose money.

1. Invest your money early to benefit from better financial returns

The time factor should never be overlooked: it proves to be an advantage if you start investing in the early stages of your life. Time offers the possibility of accessing more substantial rates of return thanks to the effect of compound interest, a powerful dynamic that multiplies your profits over the years. The concept? Generate gains from your initial capital and the interest you have accumulated.

BE PATIENT AND DIVERSIFY YOUR INVESTMENTS

Taking the time to diversify your investments will enable you, over time, to benefit from different investments at the same time. By investing in different types of assets, you will reduce your exposure to market fluctuations in a single sector.

To achieve a good return over the long term, Birdee advises you to combine diversification with caution: 

- Favour investments that will guarantee you security.
- Prepare for your future with a life insurance policy or a pension savings plan, which offer attractive tax benefits with capital locked in until you retire. 
- Invest your money in property investments that you can then pass on to your children: listed property investment companies (SIICs), property investment funds (FCPIs) or a non-trading property investment company (SCPI).
- Invest in the stock market for a long-term return. 
- Invest in atypical investments such as cryptocurrencies, crowdfunding or precious metals if you have the capital to get started. 

As you can see, capital comes to those who wait... So, are you ready to invest for the long term with Birdee?