Long-term investments always pay to an investor. Let us understand this with an example. While the world sympathizes for Ronal Wayne who in 1976 gave 10% stakes of Apple Inc for $2,300. If in place of giving up his stake he had kept with him he would have been a billionaire. Today that amount would have increased to USD 70 billion.
Does opportunity knock only once in long-term investments?
Whoever said that opportunity knocks only once couldn’t be more correct in case of Wayne. But there is the other side of this financial tragedy too. It is the poignant point on how long-term investments works in term of capital gains. Such capital gains to turn your rags to riches! If Wayne had held his stake then his earnings would have compounded at a whopping rate of 53 percent. For the period of 40 odd years or so. This would have resulted in a fat amount.
Opportunity lost by you is opportunity gained by someone else
This above example of opportunity lost is a great example. A great example of how the power of compounding works. Compounding with the advantage of long-term investments holding. This is a common strategy that has been used by all the successful investors over the years.
The wise and highly successful investor Jesse Livermore suggested that the secret behind his winning was not the thinking or only the choosing but also waiting. Another investment veteran with same luck in success at investments said a similar line where he suggested that even buying and selling is not so important in making the big money as much as waiting is. It is only prolonged waiting that stands the test of time.
How are Indian investors losing their long-term investments benefit?
The case is no different for a developing country like India. Here people still find their long-lost certificates of shares which are now worth crore of rupees. They then bless their luck for losing such pertinent documents. Because if they had discovered them before they would have sold those off for only a small earning compared to a crore.
As for retail investors who mostly take part in part-time trading and invest in stocks occasionally, investment lock-in for a long period will seem like a better option as it will require more time and dispersed concentration. Trading has two major commandments for all interested investors who want to turn their money into millions over-night. The truth is trading is no overnight game changer and requires strict discipline and regular market presence.
How to make your long-term investments work?
An investor is more like a passive worker. The first step is to pick up a stock after thorough research and then the next step is to sit and wait patiently. The best friend for every investor is time. We often think long and hard to time our investment entries in the correct time. But that is not the smartest approach and is also never an easy one.
No one really knows when the market days will be good. But if you as an investor miss a handful of these apparently unexpected good days, then you will fall short and way behind from those that chose to hold on. The greatest advantage of long-term investments is that the average annual returns from such investments turn less volatile and thus, the returns are better. As an investor moves from one year to three years to ten years and then finally to twenty the chances of a negative return significantly goes down.
This has been identified as a direct correlation by taking stocks and trading approaches of the most successful investors in the US. Another advantage associated with the equity investments is the dividend returns which also allure most investors towards them.
In closing thoughts while long-term investment is not everyone’s cup of tea as it takes immense patience, but the strategy does offer high-yielding benefits so it is worth waiting than being too jumpy to sell off even when the market witnesses a few dry spells. Ronal Wayne must feel the same with his present trolling in social media and the opportunity he missed with Apple’s stocks.