In the past, when interest rates peaked at 12% or even 20%, it was a self-written rule to deposit money in the bank. However, when interest rates are at an all-time low, many people are becoming interested in investing their income. This trend has gained momentum during the corona pandemic when reduced consumption has often meant that people had more money left to save. When it has also become technically easier to open an investment savings account yourself, the number of share savers has increased.
Separate The Chaff from The Wheat
It’s necessary to know what applies in the stock market, just as it’s essential to carry a life jacket when going out on the lake. And among stock savers, many myths abound about how the market behaves, which may not all be rooted.
Get Access to The Experts’ Knowledge
We have analyzed statistics from the world’s stock exchanges 50 years back to test whether three joint statements reflect the actual development of the stock exchange during this period. And not everyone passes the test. Nobody can forecast the future, but we feel that history can teach us something. Therefore, we have examined broad global stock indices and made an analysis that shows some of the collective knowledge that professional investors have.
Time
The first statement is that time works for you regarding stock investments. The longer the investment horizon you have, the better your odds of getting a positive return, even during periods of uncertainty and even crises. It is true if you have invested widely in global equities. Our analyzes show that the longer you keep your holdings, the greater the probability of a positive return. We also usually recommend that you have an investment horizon of at least three years to reduce the risk of needing your invested money just during a stock market decline.
All Or Nothing
The second statement says that if you are going to invest a large sum of money, then it is better to invest a little over time instead of all your capital at once. The risk is so significant that the stock market collapses when you invest. It is fake. Historically, the stock market has been more likely to go up than down. The market needs to go down during the same period as you invest a little at a time if it is to pay to do so. Otherwise, it would have been better to support everything at once. The probability that you can time a downturn while investing a little at a time is relatively low. But if the alternative is to have the money uninvested in an account in the meantime because you are worried about a downturn, can it be better to invest a little at a time because it feels safer? The risk indeed decreases when you spread your investments over time, which works well with monthly savings linked to your salary, and it may be better to invest a little at a time than not at all. But our main philosophy is to find the right, individual level of risk by putting together a mixed portfolio and thinking long-term, rather than spreading stock savings over time, which the historical statistics confirm.
Conclusion
Today, there is a record amount of money in bank accounts, and we believe that a large part of this money is long-term savings that have not been invested. Unfortunately, this money is there without any return as the big banks do not give any interest on the account. We believe instead in investing this money against the stock market. But essential to keep in mind: do not make decisions based on emotions; only trade with long-term money and feel free to invest your money in installments. Not even professional investors with excellent knowledge and good data can know when a downturn will begin or end. And historically, there has been no winning strategy to wait for a stock market crash.
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