To be a successful investor, you must have a long-term vision and plan for your money. While you may hedge or short some equities on a temporary basis, those moves should still fit within your overall philosophy for creating and sustaining wealth in the long run. Let’s take a look at why investors need to have that long-term perspective whenever they take a position in the market.
Volatility Happens During Bull Markets Too
During a bull market, it is not uncommon to see days or weeks where the market could drop by as much as 3-5 percent. In some cases, the market could drop 10 percent in a matter of weeks or months. While some may see this as a sign of a reversal and liquidate their positions, the long-term investor understands that this is merely a market correction. In good economic times, the value of a stock or an index fund could double or triple. Therefore, a correction of 10 percent or less is merely a blip on that upward trajectory.
Larger Sample Sizes Allow Investors to Make Better Decisions
All companies have bad weeks, months and years. Recently, Apple has seen a decline of about 20 percent in the value of its shares. Those who only look at what the stock has done in the past few months may think that it is time to liquidate and move on. However, the long-term investor knows that Apple’s stock has offered incredible returns over the past several years and will eventually increase in value in the future. In this scenario, taking the long-term view allows for a more accurate interpretation of the stock’s value and prospects for the future.
Dividend Stocks May Provide Income Even if the Stock Itself Stays Stagnant
If a company offers a dividend to investors, it is generally a good idea to hold on to that stock. Over time, the dividend should increase, which provides a regular revenue stream in good economic times and bad. Investors can also reinvest the dividend into more shares of the company, which increase the value of their holdings if the stock does not increase in price per share.
Any Investor Can Be Successful With Patience and Guidance
Financial experts such as Brad Reifler are successful because they understand how the market works and have studied its movements for many years. Mr. Reifler started Reifler Trading Corporation in 1982 and Pali Capital later in his career, where he was able to help others make money trading Forex and commodities. Although such markets are known for their volatility, his experience makes it possible for any investor to minimize risk and potentially increase profits as well.
While there is no scientific formula to make money in the stock, Forex or commodities markets, it is possible to obtain consistent returns through good planning and vision. Taking the long-term view can protect against entering or exiting the market at the wrong time or making a decision based on emotion instead of hard facts.