Long Term Investing -
The Way to Retirement Riches

Younger investors often turn their noses up at the phrase "long term investing" believing it to be boring. They seem to think investing should be exciting and have gains of 30% a month. Anything less spectacular is too dull for many of their tastes.

They are right in one way: Long term investing can be boring.

Maybe an average 10% return would be boring to them, too. Most, however, do not invest or don't make anything like 10% after expenses. (The major U.S stock market index, the Standard & Poor's 500, has averaged 10.4% including dividends since 1928, before The Great Depression.)

The problem with most of us is that we think more in the here and now.

Anyone who invested at the beginning of 2008 would forever run screaming at the mere future mention of stocks. For those people, 2008 was the entire history of the market; forget all the statistics that show otherwise over a lengthy period.

The return over a year or two or even 10 is no predictor of the future, good or bad. Frankly, an 84-year period is no predictor either but it is liable to be more accurate than a much shorter period.

There is one thing many investors misunderstand: Long term investing and buy-and-hold investing are not the same. A long-term investment may mean holding for a year or two or even five; it does not mean you are married to the stock. Buy-and-hold typically means just that: Buy it and salt it away without another thought. Many old certificates are discovered in attics, usually worthless.

Long term investing works best with a set of strategies designed to protect overall investment capital. We will talk about many of them on this site. Our approach will not simply concentrate on stock choices but also on the methods that can be used to invest in them, on protective strategies and on ways to take advantage of the usual market ups and downs. The objective will be average gains at least equal to those of the S&P 500 Index. We cannot promise to succeed but we will certainly try to point the way.

Short term investing implies short term targets, whether psychological or real. Investing for the short term is not investing; it is speculation. Sometimes speculation leads to spectacular wins; eventually it almost certainly leads to spectacular losses and the realization that speculation has no place in long term financial plans. It provides the thrills and spills of gambling. It is easy to see the stock market as a giant casino, but betting your future on a throw of the dice is not responsible financial planning.

Long term investing is not about accumulating the down payment for a house. It is more properly about building wealth for retirement, accepting significant volatility during the early years of your life when you have time to recover from potential losses, and then becoming increasingly more cautious as you get closer to the date of your retirement..



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