Whether you’re buying stocks directly or invested in mutual funds, there is one important lesson to learn: You cannot time the market. If you wait for prices to fall you’ll likely sit on the fence for a long time. That’s why in this piece we’ll talk about the benefits of investing for the long term and then staying invested through the ups and downs.
August 25, 2020
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No matter when you read this blog, you’ll remember a time when the market dipped and new investors started getting jittery. You’ll also remember a time when the market went up and some people who had long term strategies did not get excited and sell.
Whether you’re buying stocks directly or invested in mutual funds, there is one important lesson to learn: You cannot time the market. If you wait for prices to fall you’ll likely sit on the fence for a long time. At the same time, if you invest a big LumpSum and wait for a big high to sell, you’ll probably be waiting till the fat lady sings.
That’s why in this piece we’ll talk about the benefits of investing for the long term and then staying invested through the ups and downs. Truth be told nothing does a sexier job of growing your wealth that consistent and disciplined investing done over a long period of time.
Before we jump into details take a look at this image that illustrates how long term investments are the smartest idea.
Long term investing is the closest one can come to find a “sure thing”. At Cube Wealth we truly swear by the beautiful role time plays in wealth creation. And while we love our short term investments there is nothing like a long term investment when it comes to creating a large nest egg.
Not much of a reader? Fret Not! You can also watch this episode of The Cube Wealth Show to know the Benefits of Investing for the Long Term
Data Shows Long Term Investments Always Win
The graph above is just one example but historical data is a testament to the fact that long term investments almost always give good returns
Reduces Chances Of Emotional Decision
It’s only human to panic when your month is losing value and get excited when things are going well. Under both these circumstances, you are susceptible to poor decision making. You may sell at a lower price and incur unnecessary losses or you may buy a bad investment at a higher price. Therefore, a long term investment is far less taxing when it comes to peace of mind
Compound Interest Show You Its Magic
Every time you stay invested for the long term you give your money a chance to compound and grow. That way as time passes by your initial corpus continues to grow I size and earn even more interest as time passes by.
Here’s an example of what could happen if you invested just ₹15,000 consistently for 10 years:
However patience and time are key because if you stay invested for 15 years the same ₹15,000/ Month would be worth ₹ 1.02 crores. That is the power of compound interest because each time you would earn interest on top of what you earned last time.
It's Automated & Less Stressful
Looking at the stock market every day is taxing and just too much stress for most of us. That’s why automating payments makes things simple and you get a lot more peace of mind. Plus, you don’t have to worry about forgetting to invest on the right day and time. If you want to automate your investments, try the Cube Wealth App!
Long term investments give you an edge when it comes to taxes. You only pay long term capital gains tax depending upon when you withdraw your funds. Investing in an ELSS can also save income tax if you play it smart and stay invested for a long time.
Understand Your Investment Needs
You must identify your risk profile and set up a time horizon for your investments. Are you aggressive and willing to risk loss for higher returns? Are you super conservative and want moderate but safer returns? This coupled with whether you’re in it for a short span or the long haul are questions you must answer for yourself.
Our free mutual fund analysis tool can also help you analyse your current investment portfolio for free and accordingly help decide your investment needs!
This is a crucial benefit because nobody likes to put their money at risk. Long term investments may not beat short term tools when it comes to immediate returns. However, long term investing is a simple and straightforward way of lowering your risk and maximizing rewards.
on stock picking, poring over excel sheets, financial news, analyzing market trends, tracking the Sensex, researching company fundamentals, comparing mutual funds, reading financial reports, trying to predict the future & losing your sanity!