5 Key Investing Lessons from Iconic Musicians

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Perhaps one of the tell-tale signs that Christmas is right around the corner is when you start hearing Christmas hits everywhere you go. Whether you love or hate them, have you ever thought about how much money these songs must bring in each year?

One such Christmas sensation is Mariah Carey’s ‘All I Want for Christmas is You’, a song that has been a part of the festive season for 28 years since its released in 1994. 

According to data reported by the Independent, the glamorous singer earns roughly £400,000 in royalties each year from her catchy Christmas hit.

5 Key Investing Lessons from Iconic Musicians, Verve Financial

Source: the Independent

Even though Mariah Carey recently lost the case to have the title of “Queen of Christmas” trademarked, her song, which is the cornerstone of Christmas for many, was undoubtedly a fantastic long-term investment.

In fact, other artists, such as Wham! and Slade, are still reaping the rewards of their decades-old Christmas staples; ‘Last Christmas’, which was released in 1984, still annually pulls in around £300,000, while ‘Merry Xmas Everybody’ earns the band approximately £1 million in royalties every year. 

Now, writing and releasing your own Christmas smash hit may be out of the question, but a lot can be learned from Mariah Carey and other holiday hitmakers. 

So, keep reading to discover five astonishing lessons about long-term investing that can be garnered from your favourite Christmas songs.

1. It increases your chances of positive returns

Unfortunately, there is no such thing as guaranteed returns when you invest. Though, with long-term investing, you could potentially boost your odds of positive returns.

Mariah Carey knows the power of long-term investing all too well, as she likely didn’t anticipate the success of her smash Christmas hit. Though it’s difficult to accurately ascertain how much money the 1994 song made when it was initially released, it has continued to earn the singer roughly £400,000 every year.

The lesson to learn is that long-term investing can be effective like this for you, too. Data from Nutmeg shows that the longer you hold your investment, the higher chance you have of positive returns. 

Indeed, the investment platform found that if you randomly picked one day to invest in global markets between January 1971 and July 2022 and held your investment for 24 hours, you would have had a 52.4% chance of positive gains. 

Meanwhile, if you held the same investment for a quarter, your odds of positive gains would have climbed to 65.5%. This figure would have increased even further to 72.85% if you held it for a year. 

Even more impressively, if you held this same investment for 10 years, you would increase your chances of positive returns to 94.2%.

This shows that the longer you leave your investments, the greater chance you have of positive returns. 

2. It makes it easier to reach your investment goals

Planning out your financial future is essential if you’re to live comfortably, and so incorporating a long-term investment strategy could make reaching your goals and milestones easier.

When Mariah Carey released ‘All I Want for Christmas is You’, having the safety net of a strong investment behind her may well have made it easier for her to work towards her other goals. For example, some of her most successful songs were released after her Christmas hit, such as ‘Shake It Off’ in 2005 and ‘Touch My Body’ in 2008. 

Without a concise plan, you could end up with little to no retirement savings, or your children could struggle to afford their education expenses. It’s a mistake that could come back to haunt you in the long run.

Also, the peace of mind that comes with knowing you have a safety net of investments to fall back on can lift a weight from your shoulders and help you focus on more immediate goals. 

After all, sticking to your investment goals can be tricky, so you should ideally be looking for ways to mitigate any of the stress that comes along with them.

3. It can reduce your chances of losses

No one wants to experience a loss when investing, so have you ever considered that you could limit your losses by investing over a longer period? 

Indeed, a well-diversified portfolio over the long term could reduce the likelihood of losing money. This is because, typically, markets tend to rise in value over time. 

For example, data from Nutmeg shows that if you invested money for one year, your historical probability of loss would rest at around 35%. Though, if you were to hold this investment for 14 years instead, this historical probability of loss would drop to nearly 0%.

As you can see, your chances of a loss drop significantly when you hold investments for a longer period of time. The phrase “time in the market, not timing the market” is thrown around a lot when it comes to long-term investing, and for good reason.

A similar effect can be seen with ‘All I Want for Christmas is You’, which has benefited greatly from its time “in the market”. Each year, as the song becomes more of a necessary Christmas staple for people worldwide, the chances of Mariah Carey losing out during the festive period decrease.  

4. It can be less time-consuming than short-term investing

If you’re a short-term investor, you’ll know the amount of effort that needs to go into managing your portfolio.

You typically need to track price movements, analyse charts, devise formulae and trading indicators, and develop bulletproof investment strategies to identify potential purchases. 

As you can imagine, this can take up much of your time, and it can often be stressful to deal with.

This is one of the fantastic benefits of long-term investing; since you don’t need to constantly monitor the market and adjust your investments, you’ll likely have more time to focus on other important things in life.

The best example of how little time is consumed on long-term investments is most certainly Mariah Carey’s Christmas song. After all, she doesn’t need to work on the song or manage it at all, it just earns her a passive income every year. 

5. You can make the most of compounding returns

Potentially one of the best things about long-term investing is that you can make the most of compounding returns.

Instead of cashing out when you earn money from your investments, you can reinvest it and increase your chances of positive returns.

Consider this example Barclays created to show the power of compounding. If you were to invest £10,000, and your investment offered returns of 2% over the first year then, assuming no costs or charges, you would see returns of £200. 

If you were to reinvest this £200, you would profit from any gains on your original £10,000 investment on top of the extra £200 from the previous year. This means that should the return rate stay at 2%, your investment would grow by £204 rather than £200.

This may not seem like much of an increase at first glance, but if you continuously reinvest your gains every year, your positive returns could quickly accumulate. 

Indeed, assuming your return rate remains steady at 2%, your original £10,000 investment would grow by £2,000 after 10 years of reinvesting. 

This snowballing effect of compounding returns is one of the brilliant reasons you should consider long-term investing as the bedrock of your investment strategy.

As you may have guessed, Mariah Carey has also made excellent use of compounding returns. Forbes reports that her Christmas hit has earned the singer roughly $72 million since its release in 1994 – all from a single song!

Get in touch

If you’d like to find out how long-term investing could help you reach your goals, please get in touch with us at Verve Financial.

Email us at office@verve-financial.com or call 0330 320 5048 to find out more.

Please note

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Posted 07/12/2022

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