When it comes to investing, time is your best friend.
The longer you hold investments, the greater are the chances that you make a profit. This is true for stocks, real estate and bonds.
It is particularly the case with stocks. Every month you own stocks your odds of making a profit go up. Even better, combining the powerful force of time with a reinvestment program unleashes the Profits on Profits* dynamo. Profits on Profits can result in staggering, hard to believe dollars in your pocket. Patience and reinvestment (of a diversified portfolio) allows your money to double and double and double.
Attempting to time the market is a bad idea.
“Buy low. Sell high.” This is great advice. The only problem is that it is hard to do. What usually happens is that people do the opposite. They buy high and sell low.
The truth is that no individual investor is smart enough or quick enough to consistently beat the market and professional Wall Street traders. Attempting to do so is a losing proposition. On top of that, you pay more in transaction costs and taxes. Lower investment profits with higher trading costs does not put the most money in your wallet.
Avoid any fancy financial engineering or exotic financial products that impose a time limit or expiration date on your ability to hold investments, especially excessive amounts of debt and options trading. Loans from a broker are great until the market moves against you and your money disappears.
TIME NOT TIMING
So what should you do? The individual should utilize a “buy and hold” strategy using stock and bond bundles for diversification and cost and tax optimization. Do not trade frequently. Time is your friend, market timing is not.
INVESTING TIP: Think TIME NOT TIMING
* See Profits on Profits in The Roadside Scholar for a more in-depth discussion, p. 204.
For more information and easy to understand explanations of important money matters go to www.theroadsidescholar.com or purchase The Roadside Scholar: Amazing Money Lessons from Behind the Fence.