You Need to STAY INVESTED in the market to make money
The key to making money in the stock market is having a long length of time in the market. The longer you are invested in that market, the better your total performance will be.
On an average, you will realize that stock market has generated on an average annual return of 10-12% provided you stay invested for long period. However, many investors do not stay invested long enough, which means they fail to make this 10% return.
Generally, financial advisors recommend that people invest in stocks for a time frame of five years. That way, if there are any market fluctuations over the course of the time span, you will have time to make money.
The more time you invest in a company, the greater your chance of receiving higher returns from it. The best companies, before increasing their earnings, are already worth more to investors and tend to have a higher price for the stock. As an investor, the higher it is priced means that you’ve made significant gains in the market.
Should you buy Index funds or individual stocks?
If you’re looking for a dependable investment that consistently contributes to your financial goals, invest in an index fund. Index funds are typically made up of more than twenty stocks and can contribute positively to your portfolio. The main driver of success with this type of investment is discipline.
Think about buying individual stocks; they have the potential to have a much higher return than an index fund, but you will need to put in time researching companies to earn it.
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Mindset that keep you away from making money in Market
Investors are often discouraged from buying when the stock market dips in fear of a larger decrease, while they are also very eager to sell when it rises. The perfect recipe is “buying high and selling low.” Investors need to understand the lies they tell themselves before they make a costly mistake. Here are some very common mistakes market participants makes:
- Waiting with Expectation the market to come to the safe levels for investing.
A way to end up paying more for stocks is waiting for prices to climb. Investors often use the excuse that they are waiting for it to be “safe”. This is because when investors say they’re waiting for (the perception of) safety, they mean they’re waiting for prices to climb.
As investors avoid the short-term loss and instead opt for a longer-term gain, fear drives their behavior. This is especially true when the investor feels intense emotional pain by losing money. To stop the immediate pain, one might sell stocks when prices are high, or not buy any even when prices are low.
- Waiting for stocks to come to lower level for buying back
Investors often wait for stocks to drop in order to buy them. But, investors have no idea if the stock will continue going down or start going up again. Investors should look for a good value and buy quickly when possible.
It seems strange how greed is the cause of some behaviors. Either investor may be afraid of losing profits and wants to wait to see how their investment might fare in the future or they’re hoping for a stock increase.
- No patience: Not giving enough time for your investing to grow.
A lot of investors use action in the market as an excuse for their actions. However, investing is not a game of quick-hits. All gains come while you sit on your stocks, waiting to let them grow.
Investors are doing something that may be because they think it will make them money. They’re not invested in excitement but short-term decisions. Some people do this and they do it well and they avoid making decisions as a result of their feelings.
While you can collect dividends if you hold stocks longer, dividend payments vary and are dependent on how long you are an investor.