Becoming a successful stock market investor is everyone’s dream. Certain facts about stock market investment.
What the world’s most successful investor says on investment in stock market?
Investors time the purchase and sale of stocks according to the market. They time the sale of the stocks when the market is high and time their entry when the market has reached the bottom. One of the most successful investors and the world’s third richest person, Warren Buffet advices investors to invest for the long term. It is highly impossible to predict the direction of the stock market, interest rates or elections. He confirms that inactivity can take the credit for much of the success. Investors find it hard to ignore the urge to buy and sell. He also says that he never tries to make money on the stock market. Buffet claims that their favorite holding period is forever. He does not advocate moving in and out of the stock market. He buys and holds the stock for the longest duration possible.
You cannot time the market; market time itself
Research conducted by top financial institutions presents a direct connection between timing and your investment returns. Constantly moving in and out of the market makes it impossible for an investor to take complete advantage of the growth possibilities of the stock market. Predicting the rise and fall of the market is close to impossible. This is because the stock market does not follow a regular pattern. Based on the history of the stock market it is evident that the market is moving up on the whole.
Long Term Investment – Mantra for success
Evading the market for even a short period of time will limit your investment results drastically. On the other hand, holding your investment in the stock market can increase your returns significantly. If you study the stock market for last five years, a downfall in the stock market is very difficult to find. The market has instead gone up by 87% of the time in such five year periods. If you stay put in the stock market for as long as 10 years, the investments are likely to go up 98% of the time. Many investors experienced short term losses when the technology bubble burst occurred in 2000. However, long term investors gained substantially.
It is common to hear about people who have made a fortune by forgetting or setting aside their stocks for a good chunk of 10 to 15 years. It is rare, on the other hand, to hear of someone who has made a fortune by gambling in the market. Timing the market may reap temporary benefits but in the long run to be a successful investor, time in the market is what matters. Gambles and shuttling in and out of the market rarely lead to financial success. Taking risks or being adventurous never pays off. The temptation of a shortcut is at times too hard for people to resist.
No short cut success
Shortcuts are nothing but illusions which may look attractive at first but eventually push you downhill. Thus, you should be cautious of investment techniques which fail to go hand in hand with the principles. If financial advisors knew of ways and means to predict the fluctuations in the market, they would personally take advantage of their knowledge instead of making suggestions to others.
How Mutual funds invest?
Successful mutual fund houses do not time the market as they understand that it is hardly a possibility. They ensure to maintain a small portion of cash and a fully invested portfolio to meet the liquidity requisites. They stay put in the market for as long as they can. Fund houses that have attempted to time the market by hoarding money have had below average results during the current recovery from 9,000 to 17,000.
The best strategy in stock market investment
It is always advisable to follow the principles of marketing such as diversification, buy and retain and long term investments instead of falling prey to the temptation of shortcuts and fancy techniques. Techniques followed with the principle guidelines, on the other hand, are profitable. Do not hurry. Patience will always shower you with rewards.