Investing has a bad reputation as a “game of chance” that cannot be won.
And this is true — investing money with the goal of “winning big quickly” is much more like playing roulette than investing.
However, when the horizon (= term) of investing money is extended, investments no longer need luck to multiply.
This is exactly what we will talk about in today’s article.
1) Short-term trading requires a lot of luck
Anyone who invests (eg in stocks) for the short term is taking on a huge risk.
And to make a profit, he needs, like air, positive dynamics in the economy and the stock market.
But, according to statistics, the chances are 50/50 — i.e. equal chances that quotes will go either up or down.
2) Long investment period (10+ years) makes risks minimal
The main risk is not the purchase of shares (or other investments), but the behavior of the investor himself.
In other words, it is the investor who comes to the casino (and starts playing and losing), rather than the casino coming to the investor’s home.
Let me give you this example:
Two different people buy the same stock at the same time.
Only the first is invested for a short term, and the second for a long term (10-20 years).
In this case, the first one makes a “gamble” bet, but the second one does not (since in the long term the stock market always goes up).
Thus, long-term investor = happy investor.
3) In a bull market, investors forget about risks
A growing economy lifts all boats and all asset classes.
But the bears come and all the profit suddenly evaporates.
This is why short-term investing is so unpredictably dangerous.
Here it’s “either hit or miss.”
4) Inflation will “eat up” your deposits in the bank
Only long-term investments in stocks can beat inflation.
Moreover, not the notorious “dividend shares”, but only index funds.
In this case, any short-term market movements (including steep stock market declines) will not matter much to you.
For the reason that when you look back in 20 years, you will see how all this time your investments have been growing in an ascending line (outpacing inflation).