Bitpanda Money Matters #07: invest for the long-term

By now, you’ve:

1. Reviewed your financial situation and created a budget
2. Set SMART financial goals for 2025 and beyond
3. Built a financial plan that includes savings, investing, and emergency funds
4. Explored investment options that align with your risk tolerance
5. Started working towards passive income streams
6. Prepared for economic uncertainties with a diversified financial strategy

Now, let’s bring it all together and ensure your wealth grows over time.

The power of long-term investing

Long-term investing is one of the most effective strategies for building wealth. By staying invested over time, you benefit from the power of compound growth while avoiding the stress of short-term market swings. Markets can be unpredictable in the short term, but history shows that patience and consistency lead to stronger returns. Instead of trying to time the market, the real key to success is time in the market, allowing steady growth to work in your favour.

Long-term investing:

• Keeps you steady through market ups and downs. Staying invested for the long haul helps you avoid impulsive decisions during short-term volatility.
• Allows you to benefit from the power of compounding. By reinvesting your earnings, your money grows faster over time as you earn returns on both your initial investment and past gains.
• Supports major life goals. A long-term investment strategy helps you build wealth for milestones like buying a home, funding education, or planning for retirement.

The biggest mistake investors make? Jumping in and out of the market. Every time you try to “wait for the right moment,” you risk missing out on long-term gains.

The principles of asset allocation

A strong portfolio doesn’t depend on picking a single “winning” asset but on spreading your investments wisely. This is where asset allocation comes in. Think of it as the blueprint for balancing risk and reward. It means dividing your portfolio across different types of assets, such as:

• Stocks and ETFs for long-term potential
• Bonds for stability and income
• Crypto for diversification and potential higher returns
• Precious metals like gold and silver as a hedge against inflation

The right mix depends on your goals, risk tolerance, and investment timeline. Someone in their 20s might take a more aggressive approach with a higher allocation to stocks and crypto, while someone close to retirement may focus on preserving wealth with bonds and stable assets.

Evaluating investment risks and returns

You’ve built a diversified portfolio, but do you know how each investment will behave under different market conditions? Knowing the risks and potential returns of your assets helps you invest smarter and with confidence.

Key factors to consider

Every investment carries some level of risk. The key is knowing what those risks are and how they impact your financial goals:

• Volatility: How much do asset prices fluctuate? Crypto and stocks tend to be more volatile, meaning prices can rise or fall sharply in a short time. Bonds and real estate, on the other hand, usually experience steadier movements.
• Liquidity: How easily can you sell an asset without affecting its price? Stocks and ETFs are highly liquid, allowing for quick trades, whereas real estate or alternative investments may take time to sell.
• Risk vs. return: The higher the potential return, the greater the risk. It’s important to assess whether you’re comfortable with potential losses and how they fit into your overall strategy.

The magic triangle of investing

Remember when we introduced the magic triangle of investing? It’s worth revisiting because it’s the key to balancing return, security and liquidity, three factors that influence every investment decision.

Every asset you invest in falls somewhere between:

• Return: the potential profit you can earn
• Security: the stability and risk level of the investment
• Liquidity: how quickly you can access your money when needed

A well-balanced portfolio doesn’t focus on one at the expense of the others. Instead, it strikes the right mix based on your personal goals and risk tolerance.

Not sure what your ideal balance is? Revisit and review your risk tolerance and time horizon.

Automating your investment contributions

Even with the right asset allocation, the biggest factor in long-term success is consistency. Instead of trying to time the market, automating your investments ensures that you steadily build your portfolio without the stress of market fluctuations.

Set up a savings and investing habit with:

• A savings plan for recurring crypto or ETF purchases, enabling cost-averaging, where you invest a fixed amount regularly to smooth out market volatility
• Automatic transfers into a dedicated investment account every payday
• Reinvestment of dividends and passive income earnings to accelerate portfolio growth

This approach eliminates the stress of market timing and keeps your financial goals on track with minimal effort.

Can artificial intelligence (AI) help?

As technology advances, AI-driven investing is becoming more popular. AI-powered tools can analyse vast amounts of financial data, detect market trends and execute trades with precision. This helps investors make more informed, data-driven decisions.

One key development is algorithmic trading, where AI reacts to market changes in real time, optimising buying and selling decisions without human bias. AI also enhances risk management, assessing potential downturns and adjusting strategies accordingly.

For those looking for a hands-off approach, robo-advisors provide automated portfolio management, adjusting asset allocation based on market conditions and your risk profile, making professional-level investing more accessible at lower costs.

While AI can’t eliminate risk, it can enhance efficiency, reduce emotional decision-making, and support smarter investing strategies. Want to learn more? Check out our article on robo-advisors.

Adopting a wealth-building mindset

Every step you’ve taken in this series has shaped the way you think about money. It’s important to remember that your mindset is your most valuable asset.

Building wealth isn’t just about numbers on a screen; it’s about habits, discipline, and a long-term perspective. The most successful investors don’t just invest money – they invest in mindset and behaviour.

• You’ve learned to pay yourself first: By automating savings and investments, you’ve made financial growth a priority.
• You’re staying informed: Knowledge is power, and understanding markets, risks, and opportunities puts you ahead.
• You’re avoiding lifestyle inflation: Instead of increasing expenses with every raise, you’re letting your money work for you.
• You’re thinking long-term: You know that patience and consistency are key to building lasting wealth.

With these principles in place, your financial future isn’t just something you hope for, it’s something you’re actively creating.

Final thoughts: Keep going, keep growing

Building wealth is a journey, not a destination. The habits you’ve developed through this series – budgeting, goal-setting, strategic investing, and risk management – will serve you well in the years to come. Now, it’s time to stay the course and keep building your future.

Here’s what to do next:

• Stay committed to your long-term investment plan: Market fluctuations are normal. Maintaining a long-term perspective helps you stay focused on your goals and avoid impulsive decisions.
• Regularly review and rebalance your portfolio: Your financial situation and market conditions will change over time. Adjusting your asset allocation ensures your investments stay aligned with your goals.
• Keep learning and expanding your knowledge: The financial world is always evolving. Staying informed using resources like the Bitpanda Academy can help you make smarter investment decisions.

Financial success isn’t about luck – it’s about smart choices, consistency and patience. You’ve built the foundation. Now, it’s time to grow.

Disclaimer

This article does not constitute investment advice, nor is it an offer or invitation to purchase any digital assets.

This article is for general purposes of information only and no representation or warranty, either expressed or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of this article or opinions contained herein. \Bitpanda Stocks are contracts replicating an underlying stock or ETF. More information and the PRIIPs key information document (KID) are available at bitpanda.com.*