Meeting long-term goals

The more time you have to reach a financial goal, the more investment risk you can usually afford to take. That means allocating most of the principal you set aside for long-term goals to equities either individually or through exchange-traded funds (ETFs), mutual funds, or managed accounts that invest in stocks.

Although the value of an investment portfolio may fluctuate dramatically over the course of a month or year, over periods of 15 or 20 years or more, stocks as an asset class — usually a fairly volatile type of investment over the short term — have historically increased in value, though there is no assurance that what has happened in the past will happen in the future.

Despite the fact that a return on your investment isn’t guaranteed, it is true that when you invest for the long term, your earnings have the opportunity to compound. Compounding is what happens when your investment earnings are reinvested and in turn generate earnings. The longer you have to invest the more you stand to benefit from the power of compounding.

Louise Yamada,
Managing Director,
Louise Yamada Associates

See how much your investment can grow through compounding.

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