FastEddy707 on Long Term Investing

"The reason we lose money most of the time is we aren't thinking long term. The big money is made in long term investing, even for those who are over 50.

Fasteddy707 wrote in our Bob Brinker FREE Forum and excellent post describing why investors should look to the long term.

Here is his post

In response to This post by allancoleman :

Allan:

I think you and most investors are taking the short view too much towards investing. I have seen this in myself in the past as well. Investing isn't gambling. Don't fret about the daily gyrations of the market. Go to sleep for 5 or 7 years then look at it. Look at the long term chart for any index in existence. They all lead up , up, and up again. John Bogle correctly states in his writing that today's investors don't buy stocks; THEY RENT STOCKS ! Sure we would all like to be able to buy at the very bottom and sell at the top. But this isn't always or even likely most of the time. However, if our time frame is long enough (10 years), the odds are very much in our favor. And 20 years is a lead pipe cinch. We are easily influenced by the daily noise of up/down/up/down that wall street and the popular media like to hype. Volatility is a NORMAL part of the market's history and always will be.

There are a number of techniques we can use as investors to minimize volatility.

1. We can dollar cost average into the market in small amounts.
2. We can rebalance our portfolios periodically, say every 6mo or 1 yr or 2yr depending on the movement % wise of our investments.
3. We can value average into the market. Like Brinker is recommending now...buy on weakness and dips.
4. We can set an asset allocation that is comfortable to our risk tolerance.
5. We can diversify into foreign stock funds and value/growth , large/med/sm funds.

But the reason we lose money most of the time is we aren't thinking long term. The big money is made in long term investing, even for those who are over 45 or 50 years of age. Being wrong one time when the market is going up can cost you a ton of money. Staying in the market in a prudent fashion can make you rich OVER TIME. The time may be that we are headed for another bear market in the next few years, but it too shall pass and the train will leave the station and never look back. Therefore, I say be cautious, keep a good share of cash and short term powder for a future buying gift horse, but don't rent stocks or look at the market as a casino. The odds are in your favor if you are simply patient.

fasteddy707

July 7, 2006

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DISCLAIMER: Answers & my words are general in nature, are not meant as specific investment advice, and do not necessarily represent the opinion of anyone but Kirk. Individuals should consult with their own advisors for specific investment advice.

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The May 2006 US Consumer Price Index rose 5.2% while the Core rate increased 3.1%