Benefits of Long-Term Investing

Stock investing can go three ways i.e. up, down or sideways. Theoretically, it is possible a stock could not move up or down in an open session, but it rarely happens. So, we will stick with just two options.

Investors buy stocks with an anticipation of making profit. Obviously, every investors, except the ones that are shorting the stocks, will prefer to see stocks go up.

What does the history tells us about the likelihood of stocks moving upwards based on the time invested. Lets look into it in detail.

Number of times investors lose money

Your likelihood of losing money is 1% if you invest for 20 years and even smaller if you invest for even longer time. Where as, if you invest for just 1 month, your likelihood of losing money is almost 40%. Each day, the chances are 50/50.

Number of times investors make money

Expressing the same statistics differently. Your likelihood of making money is 99% if you invest for 20 years and even greater if you invest for even longer time.

This data seems promising even for short-term investors. Investing for just a month, if your chances of making money is above 60%, one can be motivated to do so. Mathematically, that transaction is in investor’s favor and it does make sense to go for it. However, this data is based on the market average. Be mindful that individual stocks could go way off. And generally they do.

In general, the longer you invest, the lesser your investment risk. In addition, there are other advantages of long-term stock investing.

  1. You sleep well at night
  2. You pay less tax
  3. You get time to focus on other important tasks
  4. You get advantage of compounding
  5. You don’t have to worry about making decisions especially wrong decision
  6. You pay less on commissions and fees
  7. You are certain to make money

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