The stock market is famous for its quick gains. There can be a lot of money made in a very short time for the people who know what they are doing and the ones who are incredibly lucky. However, for the people who really know about the stock market, long term investment is a common option. When discussing long term investing the story of the rabbit and the tortoise comes into the mind.
It is true that from long term investments there is a lot to gain but one has to have the patience and the nerve to face the various ups and downs of the stock market for a long term investment to work out. There are many calculations to me made and the right choices to be exercised. Compounding is what increases you money many times over. If you have invested a principle then it will be compounded over time to give you high returns. This is why time is also known as the investors’ best friend. This is obviously not for someone who would rather make some quick short time money.
When we are taking about time here, we are talking 20 to 30 years together. However, all the money that comes after all these years is worth it. Also risk in long term investments is usually low. Therefore if you are planning on some retirement savings then you should defiantly consider long term investments. With more and more money adding up to your principle, you should have no problem in taking care of yourself after retirement.
What you should remember is that the key to long term investments is to invest early. Investing early would mean that you will receive a larger sum on money when you retire about 30 to 40 years later. If you are investing at a later stage of life then you will not only stand to gain a lesser amount of money but you are bound to be exposed to more risks as well. When you invest early, you need to pay a lesser amount of money per year to meet a required target. When you start investing at a later stage of your life you end up paying more amount of money to reach the same target. Also investing early would mean that you can correct your mistake while investing. If your ventures are not working out then you can shift and correct your investments. However a wrong investment at a later stage of life can be fatal. Therefore it is always advised that you start to invest early. This will not only help you to pay less and be safe but also help you to earn more. While you are investing long term you will be subjected to ups and downs in the market. Sometimes you might not make as much money as you want and sometimes you might make more money than what you expected to make. You should be ready to face all the ups and downs and wait for your return at the projected date.
Long term investing is also related often to low risk investments, meaning that you put your money in a solid foundations of strong companies or other investing channels that are unlikely to lose their value over time. For long investing in real estate was considered ad a very safe long term investment.
Benefits of Long Term Investing
They say slow and steady wins the race. Similarly, a long-term investor is more likely to achieve and fulfil his goals rather than the investor who is in it for quick good money. Time can be an investors’ best friend or worst enemy, depending on how long he waits. Both trading strategies, short term as well as long term can be effective though; the benefit of long term investment certainly has more than a few noteworthy advantages. Some of these can be as follows.
Compounding can be described, as the mathematical procedure in which interest on money in turn earns interest and is added to your principal is one of the foremost advantages.
Another way to take full advantage and increase the value of one’s investment is by means of holding a stock to take advantage of payouts from dividends. A number of companies provide this skill to reinvest dividends with added share purchases, and in doing so, increasing the value of your investment by and large. In addition, dividends are the indication of a company’s general business policy.
Yet another thing that comes into play is the reduction of the impact of price fluctuations. In long-term investments the investor tends to be less affected by short term instability. The market will address all the factors that change during the short term, and so an long term investor or trader will not be affected short term unsteadiness as strongly, mostly attributable to certain other factors like liquidity etc. Long term investing and good quality stocks that even if affected by some factors in short-term, will in all probability give better than average returns. Long-term investors, predominantly one’s investing in a diversified portfolio, can survive market ups and downs without being strongly affected or harmed.
Making corrections is an added benefit that long-term investment incurs. It is most likely to be expected that an investor could get a steady return over a long period after a while. However there will be times when investments will earn less as well as times when it earns good money in short term. There may also very well be times when an investor loses money in short term. On the other hand, as a person has good quality stocks as long term investment, one can most certainly earn high-quality returns over a period of time.
There are periods when certain stocks do not perform well and it can be an astute alternative to pull out of that particular investment, most certainly when talking of short term. With long-term perspectives founded in good quality stocks, it is much easier to alter decisions in a timelier manner without the pressure and rush that accompanies short term and day trading investments.
Investors that start in on early on and stay in the stock market have a better chance of surviving and capitalising on the periods of time when the market is growing by adopting a long term outlook using the benefit of long term investing plans