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Don't Trade Long-Term Gains for Short-Term Ones

  • [아시아뉴스통신] Timothy Montales 기자
  • 송고시간 2018-02-28 18:17
  • 뉴스홈 > 국제
Photo by: freeGraphicToday via Pixabay
 

So you’re pretty much a newbie investor and while you’re looking forward to a financially-great future, you’re also terrified of the market that’s still-largely-unknown to you.


When you don’t have much experience, it can seem especially daunting.Realistically, investing isn’t really easy for anyone involved.Even experienced investors lose money here and there.But there are also ways to mostly stay on the right track and avoid ruining your financial goals for the future.


According to the “legendary investor” Charlie Munger, success can come from simply avoiding things that will lead to your failure.All you need to do is to figure out which mistakes will lead to your financial doom and then run as fast as you can away from them.


Nerd Wallet writer James Royal explained that one mistake many investors make is to expect their lives to turn out like they’re the heroine of a movie along the lines of Wolf of Wall Street or some other film that “[conditions]” them to think that they too can get rich quick.


“Lots of conditioning from Hollywood films and the financial media have led individual investors to the erroneous belief that they have to watch the market all the time and time their buys and sells to make a good return,” Royal wrote. “If you want a better shot at success, change your mantra to ‘Don’t just do something, stand there’.”


In fact, he explained that research had shown that the investors’ time in the market was one of the biggest predictors of their success.This means that investors who held their stocks were more successful than those who tried to time the market.


When you try to chase huge profits by selling off stocks when their prices are high, you might actually end up giving up the long-term returns of stocks that appreciate in value over time.


Similarly, if you start investing with the idea that you’d need a lot of money to invest so that you can harvest large gains, you’re probably going to miss out on compounded gains that your relatively smaller investment would have built up over time.


For instance, think about a snowball that’s rolling down a snowy slope.If the snowball has a relatively shorter distance to cover, it won’t likely become big enough.Now, if the snowball was able to cover a longer distance, it can grow huge and cause an avalanche.


“The sooner you start investing, the sooner you learn how the market works.It takes time and experience to understand the market’s nuances and sometimes-irrational behavior,” Royal wrote. “Much better to take your knocks when you have less money on the line.”