Peter Lynch, long time portfolio manager of Fidelity’s Magellan Fund, gave a speech to the Harvard B-School of New York on the eve of his retirement in 1990. His investment philosophy and strategy was succinctly summed in his opening remarks, “You can lose money rapidly in the stock market, but you can’t make it that way.”
The goal of any investing strategy is to make money and build wealth. Many, including Peter Lynch, believe in the long term view of investing. A strict definition of a long-term investment is any asset which is to be held more more than a year, while the more popular industry definition is a time horizon of five years or more. Stocks, bonds, real estate, gold, and CDs are all asset classes that can be part of a long term investing strategy.
Long term investing strategies vary by firm and by individual. The asset allocation mix, length of time assets are held, and the risk tolerance level are all factors that need to be taken into account when developing an investing strategy. Some investors gear their long term investments towards saving and investing in companies that save and invest in themselves. Other investors, with an eye towards retirement, select investment vehicles to buy and hold with most of their capital. They adjust the mix within their portfolios as they change, moving increasingly to lower risk, guaranteed assets as they age.
No matter what long-term investing portfolio mix you choose, the amount of wealth that you can amass during your working lifetime will be based on three tenets of investing: the amount saved and invested, the rate of return you realized, and the amount of time your money is allowed to compound. With long-term investing, the longer the better.