The benefits of a long-term approach to investing

One of our fundamental beliefs is that long-term investing outperforms short-term investing. 

Investment markets have been going through a volatile period, fuelled by uncertainty over the impacts of rising inflation and the war in Ukraine on global growth. As always at times like these, there has been a lot of comment in the media and many have responded by switching to ‘safer’ investments – or even exiting the market altogether. 

While that’s an understandable response to short-term events, it may also be a costly one. At ANZ Private, one of our fundamental beliefs is that long-term investing outperforms short-term investing. Here we explain why - and how taking a long-term view can deliver better results from your investments. 

Managing market ups and downs

Markets are always changing. Over the short term, investment markets can fluctuate in response to world events, economic trends, changing investor sentiment and a range of other factors. 

Sometimes, those fluctuations can be dramatic and unpredictable – for example the huge market swings at the start of the COVID-19 pandemic due to uncertainty about how the pandemic would play out. The 2007/08 Global Financial Crisis is another example. 

Events like these are impossible to predict. But history shows that there are short-term blips – and over the long term, generally markets rise. 

The graph below shows the return on a $10,000 investment across three DIMS strategies over a 16-year period from 2007 to 2022. It also shows some of the major events in New Zealand and around the world during that time. 

Prior to 2015, strategies were invested through the ANZ Private Investment Management Service. Returns are after fees before tax.

The line graph shows the trend of a $10,000 DIMS investment over a 16-year period, across three strategies Conservative, Balanced Growth and Growth.

The X axis shows the dollar value in $5,000 increments from $0 to $45,000.

The Y axis shows a 16-year period, from 2007 to 2022.

The Conservative strategy line shows the growth of a $10,000 investment over the period from 31 March 2007 to 31 May 2022 to $28,199 (after fees and before tax).

The Balanced Growth strategy line shows the growth of a $10,000 investment over the period of 31 March 2007 to 31 May 2022 to $31,875 (after fees and before tax).

The Growth strategy line shows the growth of a $10,000 investment over the period of 31 March 2007 to 31 May 2022 to $34,538 (after fees and before tax).

The first vertical dash line in 2008 represents the Global Financial Crisis.

The second vertical dash line in 2011 represents the European debt crisis.

The third vertical dash line in 2020 represents the COVID-19 pandemic.

The fourth vertical dash line in 2022 represents inflation concerns and the conflict in Ukraine.

Despite significant short-term blips following events like the Global Financial Crisis and the COVID-19 pandemic, investing for the long term allows you to balance out short-term ups and downs - and benefit from when the market rebounds. 

Investment discipline

As humans, we don’t always act logically, and investors are no different. Sometimes they are driven by emotions rather than facts. For example, investors following the crowd into complex investments they didn’t really understand was one of the main causes of the Global Financial Crisis.  

That tendency towards ‘herd’ behaviour often causes investors to over-react to short-term events, by selling investments when the price drops (because lots of other people are), and missing out when the price rebounds. It can also lead to the reverse - buying investments when they’re popular and the price is high, when most of the gains have already been made. 

ANZ’s long-term approach is underpinned by a rigorous, highly disciplined process which helps avoid these pitfalls. Our long-term horizon means we can take a more balanced view of the constant ‘noise’ in markets, and stay focused on long-term trends.

Balancing risk and reward

Any investment comes with risk – some bigger than others. While you can’t avoid risk, what really matters is how you manage it. 

Our goal is to deliver a strong performance, over time. One stellar year means nothing if those gains are lost the next year. We carefully assess the balance of risk and returns, and the long-term potential, when considering any investment. That’s why our focussed long-term investment approach has delivered strong returns over the long run.

If you’d like to know more about our long-term investment approach, contact your Private Banker.

Other articles in this edition

Important information

This information is issued by ANZ Bank New Zealand Limited (ANZ). The information is current as at 31 May 2022, and is subject to change. This document is for information purposes only and is not to be construed as advice. Although all the information in this document is obtained in good faith from sources believed to be reliable, no representation of warranty, express or implied is made as to its accuracy, completeness or suitability for your intended use. To the extent permitted by law, ANZ does not accept any responsibility or liability for any direct or indirect loss or damage arising from your use of this information. Past performance is not indicative of future performance. The actual performance any given investor realises will depend on many things, is not guaranteed and may be negative as well as positive.

This material is for information purposes only. We recommend seeking financial advice about your situation and goals before getting a financial product. To talk to one of our team at ANZ, please call 0800 500 588, or for more information about ANZ’s financial advice service or to view our financial advice provider disclosure statement see