Why Long term investments are more lucrative?

In the month of Aug’2010 Sensex has touched its 30 months high of 18,300 levels. Most of the investor who have already invested in its early days during the year 2008-09 are seeing their ripe fruits. They had been patient and shown perseverance. But the investors who missed the bus then are guessing if this is the right time to enter the market now. It’s a dilemma for all new entrants, whether they should enter now or wait for another market fall? For all such investors there is one golden rule of investing and it is long term investments. In a short term people may face a lot of volatility but investors who are investing now with a long term investments strategy should not worry about short term volatility. When we say long term investments we mean a time period of minimum five years of staying invested. In Indian market scenario, long term strategy will be best of lay investors.

It is a very common this that we listed about stock markets. Frankly speaking its really depressing for lay investors. People say that by the time news reached a lay investor and they prepare to start investing in stocks, the market has already reached its peak. As soon as the lay investors starts buying stocks the market starts correcting and prices begins to fall down. It is no surprise that we hear stock market is a risky place to be in and sorts. Actually bad timing by lay investors makes market risky for the. If I will make a statement that a well informed and qualified investor never makes loss in stock market will not be a wrong statement. Qualified investors investor’s invest on basis of facts & analysis, and lay investors invests on basis of advice and peculation. A qualified investor like Warren Buffett always makes long term investments whereas lay investors dilutes their advantages by focusing on short term gains.

I have always said in my blogs that Investments are like planting a tree. You can expect fruits form the tree after years of plantation and regular watering. No one can expect a mango tree to start giving fruits within few months, Similarly, investment are a long term activity. It will take nearly five to seven years to really start getting profits form it. Systematic Investment is the buzz word. History states that a lay investor who has no knowledge of financial and stock market jargons makes a SIP in mutual fund and after ten years his returns are better than majority of so called investment experts of the world. What that person has done is to allow his money to gorw. He has given his money the power of long term investments.

Long term investments (five to seven years) made systematically will yield higher results than you can imagine. If you are interested to really make money in stock market without taking any trouble of stock analysis and tracking sensex, start a SIP plan in a good diversified equity mutual fund and let your money parked for few years. You will be surprised to realize that making money form stock market can be a piece of cake.

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