There is a famous saying “Don't time the market, spend time in it”. Times are bad. The stock markets across the World are crashing. The Chinese economy has crashed. The Brazilian economy is running for cover. The Russian economy is down. The Indian economy which was doing well till now, has hit a road block.
The outcome of this…..All major stocks have crashed. You are sitting on major losses. You just want to sell all your stocks and run away from the stock market. Your friends and advisors rush to your aid in these bad times. Don’t sell they tell you. Stay invested in stocks for the long term. You will make money. So the big question…How to be a long term investor?
To be a good long term investor requires money and lots of it. The key to being a long term investor, is the ability to invest money and forget about it. You may have the ability to take all the risk in the World. The question is Can You?
You invest heavily in the stock markets with the intention of staying invested for the long term. Unfortunately your wife lands in the hospital and you have to pay a huge medical bill. You have to remove all your money from the stock markets, when they have fallen and suffer a heavy loss. Your dream of being a long term investor has been shattered.
See Also: Stock Exchanges In India
Remember : To be a long term investor you not only need the willingness, but also the ability to stay invested in the stock market for a long time.
You have decided to commit your money in stocks for the long term. You need to stick to this decision. You need to be positive and know what you are doing. Select stocks with good fundamentals and stay invested in them. If you panic and meddle too often in your investments, you will suffer a loss. Pick good stocks and stay invested in them.
You would like to invest in the stock of the Company which is available at a low price, but has vast potential for growth in the future. These are everybody’s favorite.
You are even willing to pay a higher amount for these growth stocks. The fund managers who find such stocks earn a lot of praise. Nobody remembers the stocks which grow slowly and steadily over the years. The long term hero’s. You need to focus on value and not growth if you want to be a long term investor.
You buy any stock and hold it for a long time. Your stocks are not going up. You have held then for 3 years and you are disappointed. Just buying any stock and holding it for the long term does not mean its price will rise. You need to buy stocks with good fundamentals. You have to do your research, if you have to pick stocks which have good fundamentals. Just buying any stock and hoping for it to go up doesn’t happen.
Do not invest in stocks of Companies just because they were yesterday’s winners. Just buying shares of Companies which had done well in the past and staying invested for the long term does not guarantee success. For several decades public sector banks were the kings of banking in India. Their stocks were the top performers in the banking sector. Private Banks quietly made their entry into India, post liberalization in the 1990’s.Today Private banks stocks are top performers in the stock markets and the Banking Index.
You have to recognize reality when building your portfolio. Some of the stocks in your portfolio might not perform and need replacing. Just holding these stocks for the long term is futile.
Good long term investing requires knowledge and dedication. You need to know what you are doing. You also need time to do your research. You must not lose your money just because you are lazy to do your research. If you do not have the knowledge (understanding of how stock markets work), or the time to do your research, then you must let someone else handle your investments.
Who better than the fund manager of a mutual fund to manage your money? If you are a long term investor in the stock markets, a good equity diversified mutual fund is the way to invest. Keep aside money you do not need immediately and invest in the stock markets.
Remember: You have to decide how best to handle your money. No one else can do it for you. Invest wisely for the long term and grow your wealth.
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