The stock market is a maze, and it is very easy to lose faith in it. But if you keep your eyes and ears open only to your own research and strategies, you will be able to survive the stock market. In order to survive the stock market, an investor also needs to adopt a long-term perspective. There will always be self-proclaimed gurus and pundits who keep harping on buying certain stocks and beating the market, pay no heed to what they have to say.
The Truth of the Stock Market
If we pause for a second and focus on what these other experts have to say about the stock market, don’t you think that there will be richer people in the stock market, and nobody would make any mistake at all? You have to fend for yourself. That is the ultimate truth. The entire concept of selling the fund that you own to purchase something that you want for better reasons, is only possible if you can choose the fund suitable for you. It is extremely important to choose the offerings that suit your needs.
However, most long-term investors tend to refer to past performances of a fund or are swayed by large returns from a specific sector. This is a mistake.
The reason why this is a mistake is because when the average investor is aware of a top fund, they are looking at stale news. The gains have already taken place, there is not much money to make anymore. Investments like this become overpriced and overvalued and soon they start to decline. Most people invest in such funds and rather than making money they start losing it. To make money in the stock market, you need to take decisions for the future. You need to select funds that will perform better in the future.
Grabbing on to the tailcoats of an already successful fund yields very little for investors and very few successfully make any profit.
Who Wins, then?
It is difficult to win all the time. Even the investment greats have bad years and no one can anticipate that all the time. Having a bad year does not necessarily imply that you have adopted bad strategies. No, a bad year are governed by factors beyond anyone’s control and it can be anything from weather, politics or even war and terrorism. There is no reason to lose faith or abandon your investments just because you had a bad year. If you are a long-term investor, you should focus on long-term movements in the market.
The Long-Term Way
When it comes to the short-term movement of the stock market, it is dicey. You cannot rationalize these changes. However, if you go long-term, you do not need to worry about these short-term tomfooleries. Concentrate and take a look at performances over a 10-20-year period. The general direction of the number will always be upwards in the long-term. Take advantage of this information while you devise your strategy. You have to however accept the fact that the fund that you choose might not end up being a top-performing fund.
Make sure to take logical decisions, not emotional ones. The latter will make you lose more money than you will earn. One wrong move might just cost you your portfolio.