Investing can be rewarding but is often uncomfortable!!!

by Amandeep Singh

in Investing

“Nothing ventured, nothing gained” applies just as much to the stock market as it does to other aspects of life. Most investors realize this in theory, but may not feel so sure about it when they have to face the reality of a falling market. This is only human – when markets are buoyant and your portfolio is going up in value, you probably feel you have made a good choice. But that won’t stop you questioning your investment decisions when things are more volatile and you see your investment fluctuate in value.

When stock markets are going through one of their inevitable periods of turmoil, it can be reassuring to take a long term perspective and remember that you are investing for years, rather than days or months. This may remind you that there is plenty of time for the markets to recover from any temporary setbacks. And you will see that the only way to benefit from the stock market’s potential for significant long term growth is to endure periods when things look a bit more worrying.

Another benefit of taking a long term view is seeing for yourself that the general trend in stock markets has been positive, even though there have been sharp falls. The Indian market has grown since 1979, when the BSE Sensex was launched. It is interesting to note that the largest fall in the Indian stock market – on 6th March 1986 – barely registers as a blip, even though the market fell by more than 13% on a single day. This is because it recovered in a matter of weeks.

The market decline of 2000-03, which is when the tech bubble burst is clearly visible on the chart. However, when seen in the context of a 28-year view, the boom of the 1990s seem to be a distortion, after which market performance corrected itself and then returned to the long term upward trend.

The real value of investing for the long term

Research by Fidelity shows that over the last 28 years, the probability of investors losing money over a one-year or three-year period would have been relatively high – 30% and 15% respectively – if they had invested in a fund tracking the Indian stock market. However, the probability of losing money on a similar investment over ten years would have been as low as one percent – this has also been true for most international investments. The message is that the longer you invest for, the more likely it is that you will benefit from the long term growth potential of the stock market.
Read A place for cash>>

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