Investing is about creating enough wealth to achieve various financial goals. These goals could include buying your dream home or car, children’s higher educational and marriages, or even your retirement.
Each financial goal is different. Some can be reached in the short- to medium-term, while others require long-term planning. Financial goals are time-bound. The gestation period for investments to bear fruit is also important. There is no magic bullet that will instantly grow your wealth. There are no shortcuts that will guarantee you achieve your financial goals in the fastest time possible. To achieve the desired results, investments require time.
Investors must have patience and discipline to be able to make a good investment decision. It is true that not everyone makes money. However, it is true that not all investors are able to be disciplined and patient. It is important to remember that it is better to spend time in the market than timing the market. What does this really mean?
As you all know, markets are constantly changing because there is an ongoing price discovery mechanism for the underlying securities. They do not move in a linear fashion. Market movements are unpredictable, unpredictable, and often out of reach for anyone’s control. Market movements are a part of everyday life. Market cycles, both bullish and bearish, are part of everyday life. The truth is that the market doesn’t exist without these cycles. Instead, volatility and corrections – whether short-term or long-term – are integral features of a dynamic marketplace that offers opportunities to accumulate stock and units at lower prices. These opportunities are crucial for creating wealth, big and small.
Investors who attempt to time the market to make money are unable to predict the markets’ movements and cannot generate wealth because of their unpredictable nature. If investors are successful in timing the market entry and exit, it is likely that this is luck. These investors are rare, if not non-existent. This strategy can lead to either permanent exclusion from markets or long waiting.
Let’s be clear: no one can predict the market. Investors are fooled by those who claim they can predict the markets. These are not uncommon events in history. After a few years with negative or flat performance, the markets would give huge returns within a year or so. This is just one example. Market experts had predicted that Sensex would reach 50,000 just before the pandemic of early 2020. We are now witness to what has happened. In April, the index fell to 27,500 within a month. This was just a month after it had risen above 41,000.
In the midst of increasing uncertainty, investors and market specialists began to realize that it could take 2-3 years for markets to recover their pre-pandemic levels. They were all wrong. Stocks recovered their previous highs and surged to exceed the 61,000 mark in 18 months. This was a historic peak and an increase of more than 120% relative to the lows of pandemic.
Investors who didn’t panic sell off in April 2020 would have had their wealth double or tripled if they had stayed invested and used the following corrections for more units at throwaway prices. Similar situations occurred during the 2008 global crash. After hitting bottom, almost all of the losses were recovered by markets within one year. Markets rewarded those who invested after the long consolidation periods of 2000-2004, 2009-2013.
Adhil Shetty CEO of Bankbazaar.com says that while there are ups and downs in life, they are not permanent. However, over the long-term, the markets have a history of growth. Investors who stay in the market and have clear goals will be rewarded with significant wealth creation.
You would have been richer if you had stayed invested in the market and spent more time there. To be a successful investor, it is a simple and sure-fire way to stay in the market regardless of market cycles. Remember that you have to be there in order to win a game. Complementary exits and entries can ruin the magic of compounding.