A little bit of Friday Humor to round off your week.
We agree that long-term investments aren't the sexiest kind of trading strategy out there, but some men (and women) DON'T want to watch the world burn. They want to retire by 65 and enjoy their later years.
But how do you know what strategies are safe and which ones are risky?
Many investors believe that during periods of market ups and downs, the safest strategy would be to sell their investments and liquidate to cash, believing that they can avoid the lowest of the lows, and dive back in and invest it all over again when the market wave looks like it's gaining momentum and is on the rise.
But look at the graph below!
As the chart below shows, the costs of taking your money out of the market even for a short time can be dramatic, and show why short term plays are not a smart strategy!
So you see, the investor who left their money in the market—even through its ups and downs—made more over time than the others who tried to play the buy-sell-buyback game.
The reason why this is is that unless you're a full-time day-trader with all the time on your hands to watch market movements, coupled with years of experience in witnessing company trends, the odds of you noticing a market spike in time to profit from it are slim.
Proof of this is that the average people who missed even just 10 of the biggest up-days for that stock lost out on an additional 2.6% of growth.
The unsexiest investor of all in the study was off-the-mark on 50 of the biggest up-days (he must not have any email stock ticker notifications turned on—or SprinkleBit buddies!), and because of that, he lost out on a whopping 8.2% potential return on his initial investment.
So the morale of this story kids, is don't try to play a game of ESP with the market. It takes hard work, research, a little bit of sweat (we imagine Richard Simmons would agree!), and patience.
Put them all together, and all of those qualities are very sexy.
So I guess our initial assumptions about long-term investing were wrong. It CAN be sexy after all!
Disclaimer: This article is not actually endorsed by Richard Simmons, nor does it necessarily represent his views or investment advice. Hey, some men just want to watch the world burn!
Author: Kathryn Wells
Kathryn is Editor of the SprinkleBit Investing Blog. She occasionally writes about topics on self-improvement, saving for retirement, and is really passionate about start-ups and cool futuristic inventions and crowdfunding. She believes that if she can learn to invest, anyone can learn to invest.