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The stock market’s average annual return is 10% better than you may find in bank accounts or bonds. But do you ever wonder why most people fail to earn that 10% despite investing in stocks? A significant reason is that most of them never stay invested for a long time. The key to success in stock markets is remaining for a longer time in the stock market; the length of time you devote can predict your total performance.
To make money from stocks, stay invested
More time invested ensures more opportunities for your investments to go up. This higher price converts into a return for the investors who own the stocks. First of all, you will need a brokerage account before you start investing. It takes only about 15 minutes to open this account by following a few steps.
More time invested in the market also helps you to collect dividends if the company pays them. If you are a frequent trader and trade daily, weekly, or monthly, you can bid those dividends a goodbye, as you would not sell stocks at the crucial points on the calendar to get the payouts.
If even this does not persuade you, then consider this example. More than 15 years through 2017, the market returned almost 9.9% annually to those who were fully invested. However, if you even missed just the ten best days in that period, your annual return may drop to 5%. Also, if you missed the best 20 days, your annual returns shall drop to 2%, and for 30 days, you may have losses that are -0.4% annually.
Making money in Stocks
In other words, you can see that you may have around twice as much By staying invested as you would have earned by waiting for a shorter period and monitoring the market. No one can predict those ten extra critical days. However, investors, therefore, must try to stay invested the whole time to grab them.
Three excuses that keep you away from making money investing
The fun factor about stock markets is that the goods go on sale and everyone gets too scared to buy. That may sound silly, but it’s the actual truth. It happens even when the market dips even a few percent. Hence the investors become anxious and sell their stocks for losses. Yet when prices rise, investors jump in again to buy the stocks. The stock market is nothing but a perfect recipe for buying high and selling low.
To Overcome these extremes, investors may have to understand those lies that they tell themselves.
1. I will wait until the stock market is safe to invest in
When the stocks decline, this excuse is Commonly used by investors. This is because they are too afraid to buy. It may be possible that the stocks are continuously being denied for a few days, or perhaps they have been on a long-term decline. Investors often say that they are waiting for the stocks to be saved. It only means that they are waiting for the prices to go up. Hence waiting for safety is nothing but ending up in paying higher prices, and it is indeed a perception of security that investors choose to pay.
This behavior is driven by fear, but psychologists call this “myopic loss aversion.” It means that investors should avoid short-term losses to achieve long-term processes. It is supported by the argument that it causes pain when someone loses money and can do anything to stop that pain.
2. I’ll be back next week when it’s lower
This excuse is used mainly by future buyers as they wait for the stocks to draw. But as the data suggests, investors are unaware of which stock may move on any given day, especially in the short term. A stock or even a market can just as quickly rise and fall in the coming week. Intelligent investors invest in stocks when they are cheap and then hold on to them for a longer time.
The emotions of fear or greed can’t drive this kind of behavior. A fearful investor may worry that the stock will fall before next week and hence wait, while the greedy investors expect a fall and try to get a much better price. You should be aware of the leading affiliate program to make money online.
3. I am bored of the stock, so I am selling
This excuse is often used by investors who want excitement from their payments. This is similar to the action in a casino. On the other hand, intelligent and successful investing is always dull. Savvy investors hold their stocks for years and years, allowing them to compound gains. Investing in stocks is not a quick hit game, usually. All the profits may come to you while you are waiting and not while you are trading frequently in and out.
An Investor’s desire for excitement drives this kind of behavior. And it is possible that this desire is fuelled by the misguided notion that intelligent investors are trading daily to earn big profits. While some traders are successful in doing this and even they do it ruthlessly and rationally.
Index funds or individual stocks?
If that 10% annual return seems attractive to you, then the right place for you to invest is in a fear and greed index fund. Index funds hundreds of stocks that reflect an index such as the SNP 500, you need little knowledge to Succeed. Success is driven by the discipline of staying invested.