The stock market is sometimes like the weather. On some days it is windy and stormy, while on the other days it is calm and sunny. No matter how many predictions or analyses we make, we can never fully predict the stock market. Since the stock market is very volatile and cannot always be predicted, many people choose to invest for the long term so as to average out the returns on their investment.
Many great investors like Benjamin Franklin and Warren Buffet amongst many others have spoken in support of investing for the long term. It helps an investor tide through the ups and downs of the market, and also helps to considerably reduce risks.
Is long-term investing for everyone? Let’s look at who should invest in Long term stocks.
In the stock market, even investors who may not have the time to study the market every day participate. For them, it is not wise to trade on a regular basis or take decisions as per their limited knowledge. It is ideal for such investors to invest in mutual funds or a SIP for a long time horizon. Investing in mutual funds or SIP will have many benefits for such investors.
a) Investors will not have to track the market every day and yet be an active part of it. By having an online trading account, they can invest in a monthly SIP in an index fund or perhaps in a large-cap fund.
b) Investors will not have to worry about the daily rise and fall of the market. By investing in a large-cap fund for the long term or by having a monthly SIP, investors will be able to stay away from the stress of the daily rise and fall of the market. Since they know that returns come in the long term, they will be able to manage their portfolio as well as their emotions better.
Very similar to investors who may not have the time to be updated and well-read about the market, risk-averse investors can also benefit from long-term investing. It is rightly said that in the stock market, it is as important to control one’s emotions as it is to invest in good stocks. A risk-averse person may get troubled and stressed by the daily movement of the market and may take harmful decisions.
For such investors, it is best to invest in a mutual fund SIP for the long term. Investing in a mutual fund SIP will give them the consistency, discipline as well as opportunity to beat the market in the long term.
Salaried employees are people who get their fixed salaries at the end of each month. Since salaried employees have an understanding of how much money they get every month, it is easier for them to plan their investing journey and allocate an amount every month to the stock market.
For most salaried employees, SIP is a great investment tool. It helps them to be disciplined and consistent. It also doesn’t require everyday tracking of the stock market. Since these types of investors retire from their jobs at the age of 60, it gives them a long time horizon to stay invested in the stock market and benefit from long-term capital gains.
People who own a business must invest in long-term stocks. Having a business is extremely time-consuming and is of volatile nature itself. A business person has the ability to take risks however since their source of income is volatile itself, they should allocate some amount of money for the long term. Such investors can invest the savings from their business into the stock market by investing in upcoming IPOs or in large-cap funds.
Business persons can also invest in a flexible SIP as the minimum amount to invest in a SIP is only Rs.500. SIP is one of the best investment instruments to ensure long-term returns and also to maintain discipline as an investor.
Traders are those investors of the market who participate in the stock market at regular intervals. Traders either participate in intraday trading or in swing trading. Traders study the market every day and are always updated with the ongoing events of the market.
Traders are risk-takers and do not usually invest in the long term. However, long-term trading can be extremely useful to traders as well. Since traders invest in the market from a short time perspective, they are often prone to more losses or a series of losses.
Traders can benefit from long-term investing as it will help them average out returns in the long term. Traders can allocate some amount of their funds for the long term in the form of SIP or even particular stocks. Since traders are active participants in the market, they can make more informed decisions. Having a long-term investment along with their short-term trades will give them benefit as some part of their money will always be safeguarded.
Warren Buffet said that “The stock market is a device for transferring money from the impatient to the patient.” By being patient and consistent in the market for many years, people have been able to enjoy great returns. Open a demat account today and start your online trading journey.
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