You can choose to go for long term investment to build up your assets. A sensible diversified investment is not just enough. Employing methodological analysis with a well framed policy to take profits and not to forget, hedging is essential. We will be discussing some strategies of long term investments here. You can understand how the methodical studies on stocks and investments are useful. They can sound an alarm to the investor at the correct time to sell his stocks, make profit and walk away from the market.
Merely investing haphazardly in different long term schemes is useless. Your investments should give you a handsome profit over the long time. You should not loose your sleep for bad investments.
In the year 2000, the farm stocks continued a sharp upward trend for 18 yrs in a stretch. Anybody who had invested cleverly in farm stocks could become very rich. A large number of people blindly put their money in the farm stock without working on a strategy to book profits and move away from the market if the stock values start going down. It was very common for people to buy at low prices when the stocks fall and accumulate stocks. Thus they incurred huge losses when there was a sharp dip in the stock prices in year 2000. This was the time when Robert Allen released his marvelous book ‘Multiple Streams of Income’.
In case you happen to be an investor and not a trader, plan some exit scheme. One of the best exit plans is that followed by Peter and his friends, mentioned in Robert Allen’s book. Watch the moving average on the chart and retain your stocks as long as the average is up and you earn money. When the average starts dropping get rid of your stocks and hedge your position. It is sensible not to stick to them when you are not gaining.
The only way to increase your wealth is long term investment done very wisely and decisively. Put your money only in those chips which are gaining their price, there can be some normal bumps or pitfalls but average upward trend is maintained.
Drawing a two moving average chart is most useful. You can detect any vital tendency of change in the stock market. When direction is upwards the averages continue there for long. When there is an indication of a bear market, go short. You easily know the market movements with the chart, and can maintain your resources in tact. The chart will make you decide when to sell the stocks.
All index fund managers feel disgusted with many of their clients who are in habit to frequently moving from one to another fund with every sign of change in the market. They only want the customers who stay invested in the funds on everlasting basis. It may be because of their fees or commissions involved in the transactions.
It is recommended to enter the market at the correct time. The moving averages graph is the efficient tool which can be used to find the perfect time to enter or exit the market. Grow your wealth and brighten your future. Do not be optimistic to hold your stocks when the markets are on the verge of a fall.
As per the indications on moving average charts investors got the opportunity to enter back in May 2003, at that time market was moving up. It happened only 2 months after the bear phase was over. Some people did not have any stock during the period the markets fell. But many people did not exit out as they did not follow any plan. Ultimately they lost their assets to the extent of 50 to 70%.
No fund manger ever advises his clients to stay away from keeping any money in the mutual funds even during the bear phase. It definitely has an impact on their fees and the related commission which the managers will not like to lose. As a result the customers mostly keep their money in the funds. Fund managers never tell that it is bear phase and time to move out. They will try to convince the investors that it is temporary unsteadiness in the market and will soon be over. This results investors incurring huge losses in the process.
On the other clever investors are not worried about using the moving averages and keep alert to stay in or out of the market and keep assets ever growing for their retirement. They stick to the up trends and quit the market when it is following a decline. They again get in when it is going up. When the market is moving down, they purchase index funds. They utilize the options to secure the index fund investments by going for a rather long expiry time which may be over a year.
The target is to save their money invested in the index fund. It provides them insurance on their index funds if by any chance the market is hit further. You insure all your other movable or immovable assets, then why not to insure these investments.
The reduction in the value in options is of course a serious thing. But on the other hand if you find your finances getting reduced in bear market and you still hold them and don’t take any step to protect them. This is not correct for a long term investor.
One of the best ideas would be to retain your positions in all trends for each investment; let these be stocks, bonds, property or funds. Secure their places against any downfall in trend.
One builds his wealth with the rise in stock value and erodes his resources when the value is reducing. It is just like going up or down the steps. It needs only some effort to sustain your position.