Global Strategy

Best long-term investment

The most profitable investment in the long term is the stock market investment, and more specifically the stock market indices, it historically outperformed all other investments.

It goes well beyond real estate for example, and without all its constraints such as tenant management, fixing dammage…

This is not a substitute of real estate investment , because it also has a lot of advantages, but the stock market is a complement to consider.

One big advantage is that you can get your money quickly if you have an urgent need for cash, which is much more difficult when you’re only invested in real estate.

It allows to diversify your investments by sectors (industry, health, environment, telecom …), by geographical zones, by types of assets (stocks, indexes, bonds, commodities …).

Therefore the stock market is an essential element to take into account in the diversification of your investments.

Majority of people are afraid of the stock market because they do not understand how it works and are afraid because of the volatility, they think the stocks could quickly lose all their values, or disappear.

Of course this happens sometimes, so for better security we can invest in ETFs, which dilute the risk. 

An Index never fall to 0!

 

 

 

 

This chart compares the evolution of the  S&P500 index and the real estate, between 1987 and 2013, We clearly see in spite of the strong fluctuations, the performance of the stock market is clearly superior.

 

These strong fluctuations can be neutralized and the curve can be smoothed as we will see later. 

 

 

This one compares the average returns of differents financial assets over a period of more than two centuries, stock market is, again, largely above.

 
We can do better than just follow the index, we can reduce risk and volatility in times of crash.
Even in times of stock market crash, some portfolios were slightly positive, others held up very well
 
 
 
On the graph below, we can see the annual returns of two portfolios between 1999 and 2017, Portfolio 1 is only composed of US stocks , Portfolio 2 is more balanced  and diversified.
 
As we  can see, during the crises of 2000 and also 2008, Portfolio 1 100% stocks , lost at a time up to 37%,
Portfolio 2 , which is well diversified, has remained in equilibrium and has even been positive.
 
With this example, we are well aware of the advantage and the need to have a well diversified portfolio.

.How to control risk

 
Balanced and diversified portfolios, composed of different assets such as indices, bonds, commodities …,  helps managing risk and reducing volatility.
 

As these assets are not correlated, this helps to reduce volatility, to control and minimize risk and losses, while achieving a return that is more correct over the long term (average historical yield between 5 and 10%).

Another significant advantage is that there is almost nothing to do once your wallet is created, 
only a few adjustments, one or two times maximum, per year are enough.
 

To capitalize to the maximum and benefit from compound interest, the ideal is to make this investment over a long period, several years or even decades.

People who already have a large capital, can use these portfolios to generate good passive income.

Although it’s never too late, it’s best to start saving and investing as soon as possible. we can start investing with small amounts

 
PERFORMANCE OF A 10-YEARS DIVERSIFIED PORTFOLIO (BETWEEN 2007 AND 2017)
 

10,000$ invested in 2007,  in 2017 the worth of portfolio is 23944$

 Now, same portfolio but this time we save 1000 $ every year that we reinvest in this portfolio, gives a portfolio worth 42314 $ in 2017.

 

By saving and reinvesting regularly on these portfolios, you can accelerate things strongly, and by multiplying these figures by 2, 3, 10 … the final capital can be really impressive.

You can find here the detail of  3 simple and strong portfolios