When you think about investing for retirement, you might wonder what kind of returns the markets will provide to help you towards your goals.

However, when it comes to investing for the long term, your behaviour and decisions can have a bigger impact than any market movements.

Here are a few things to think about.

Time may be your biggest asset

In many ways, time can be one of the biggest assets you have when it comes to investing.

With time on your side, it is generally possible to take on more investment risk, which may lead to larger returns over the long term.

It also means you have more time for your returns to compound.

This can mean that, in some cases, you may end up with a larger total sum than someone who started later, even if they contributed more of their own money.

The Financial Markets Authority gives this example: You invest $10,000 in a product that offers a fixed return of 4 percent a year after fees and tax. At the end of the first year, you receive $400 in interest, bringing the total investment to $10,400. At the end of the second year, you receive $416, which includes interest on both your original investment and the interest earned in the first year. The total balance is now $10,816. That additional $16 is an example of compound interest.

If the same investment was left in place for 10 years, by the end you would have $14,802 – your original $10,000, $4000 from interest, and $802 earned from interest on the interest.

How you react to market changes matters

Seeing the value of your investment balance drop can be uncomfortable, and it is likely to happen more than once over the course of a long-term investment (these are not term deposits or other savings type accounts).

How you respond to drops in the value of your long-term investment may affect the eventual outcome. Before making any decisions to change or move your investments, it’s important to talk things through with your investment adviser, who can help you assess whether an action is appropriate for your situation.

Moving investments into more conservative assets during market downturns can lock in losses. The Financial Markets Authority has noted this occurred during the Covid downturn, where in some cases, investors who moved their money missed out on the subsequent market rebound and therefore were on track to end up with lower balances over time.

Choosing the right investment for your risk profile and time horizon and reviewing it with your adviser whenever your circumstances change, can make a real difference over time.

Consistency is important

Markets do move around, and your contributions might too.

It might be the case that you go through a period of time where you aren’t earning as much or cannot contribute as much to your retirement savings.

What matters is that you keep progressing towards your goal over the long term. A single bad month is unlikely to matter in the scheme of a 40-year investment. Smaller decisions you make every week over those 40 years can really add up.

Keep perspective

Sticking to your retirement investment strategy requires you to take a long-term perspective.

Sometimes, it can be helpful to have outside input.

Research has shown that working with an adviser can deliver better outcomes. It can be easier to stay the course if you have someone to reassure you that you’re on track and your strategy is still sound, or to help make adjustments when circumstances change.

Like to talk?

If you’d like to check you are on track for your retirement goals, or to put a new plan in place, get in touch with the SHARE team. Our investment advisers can help craft a plan that works for you.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.