One of the key parts of your long-term, retirement-focused part of your portfolio is how they perform over the long-term. Of course, we want every investment to be a home run, but the season is 162 games, and not just one at-bat. To succeed over the long haul, you need investments that will grow and perform well over the long haul.
While I will never disparage a younger person for taking smart, calculated risks, a part of even a young adult’s portfolio should have some of aspects of what will perform well for them over a multi-decade period.
The first financial investment I ever had was in Southern Company, an electric utility in the Southeast. Did it (or will it) ever perform like Amazon or Netflix? No. But will it grow over time, especially if you dollar-cost-average in and reinvest the dividends? Yes.
And that’s a key question to ask yourself when you build the long-term, core part of your portfolio – how will this investment perform over a 30-, 40, or even a 50-year period. Blackberrys, Miami Subs, and Iomega Zip Drives come and go, but Apple, McDonalds, and Microsoft may be here to stay.
However, even these core stocks must be monitored for their long-term prospects. In the 1970s, if someone asked a financial professional what would be an ideal “widow and orphan” stock, they may have said General Motors or K-Mart. Both have since gone bankrupt. So, a long-term view, ignoring the hiccups, with a steady eye for when circumstances may permanently change, is the key to building your long-term financial portfolio.
And yes, Target Date funds, passive or active ETFs, etc. will suffice. But if you want to build your own long-term portfolio, with more control and fewer fees, then this approach may serve you well.
DECADES to Wealth 