Investing in the stock market is investing in the future

February 04, 2022 7 min read

Investing in the stock market is investing in the future

Investing in the stock market is investing in the future

An Investment in the Stock Market represents the management of money by the investor, whether it is a company or a natural person, who seeks to obtain some return in the future, that is, he will acquire securities in such a way that it generates an attractive return.

Investing, which is contrary to saving, means actively putting money to work so that it multiplies over time.

Before starting to invest, it is necessary to carry out financial planning to organize your finances and develop a plan that allows you to save an amount of money that you can allocate to stock investment.

How can I invest, if I have no money? But time, yes!

The future is built in the present and what’s better than starting today. There is the so-called investment horizon, which is defined as a period, whether short, medium, or long term; in which according to your objectives you must protect your investments with the firm purpose of fulfilling each of the goals. That is to say: You would be filling a basket, for each one of the objectives, of investment instruments according to the planned period and duly diversified.

Now that you know, it is easy to invest!

Investigating, comparing, and analyzing to invest is the most important decision that helps you secure your future. And with good learning, you will realize that the Stock Exchange brings together practically all the investment instruments to fill those baskets over time according to your planning for the future.

End your working life with physical and financial health, with goals achieved, such as your plan for retirement, which you have been strengthening throughout this life. I assure you that it will be the best emotion.

Always approach a financial intermediary that is regulated, authorized, and supervised.

Is it worth investing in the stock market?

Statistics would say yes, but a survey among those who at least once bought, directly or through managed savings, shares on the stock exchange, would give the most disparate answers. Where is the mistake? Given that the psychological element could considerably affect the results of our survey (people tend to forget the small gains obtained, while perfectly remembering the losses), I suggest using statistics to formulate an "objective" analysis.

It follows that the answer to our initial question is undoubtedly affirmative. The stock market indices, in fact, with the fluctuations we are well aware of, all tend to increase and this leads us to say that, fixed a time frame, the probability of an increase in valuations is greater than the probability of a possible reduction.

This consideration, undoubtedly true, must not make us make the mistake of believing that more people are satisfied with the bag than those who are disappointed. It is easy to see that the small losses of a large part of the investors are largely offset by the substantial gains of a few.

There are different opinions about whether it is profitable to invest in the stock market in the long term or not. Who will be right? What does experience tell us? 

Contrary to popular belief, long-term investing in the stock market is something anyone can do. You can even make a profit without having a high knowledge of the subject, or in others such as economics or statistics. Of course, to invest in the stock market in the long term, a theoretical base and a minimum understanding of the subject are necessary, such as knowing what it is about, how it works, and also knowing everything that you should never do when investing in it.

When you are starting in the world of investment and looking to create your investment portfolio, you must take into account several factors. One of the most important to note is the deadline. A long-term investment lasts longer than one or two years. In this way, if you want to invest in the stock market in the long term, you must fill yourself with patience and a series of good practices that we will tell you about in this post.

What does it mean to invest in the stock market in the long term?

Investing in the long-term stock market is one of the different forms of long-term investment available to you.

To invest in the stock market and get the best return, do not think about the benefits in the short or medium term, it is best to opt for a longer-term.

The reason for being a long-term investment is that the longer the investment lasts, and through interest or dividends, the more useful the securities will be. In simpler language, long-term stock investing works well because when you invest in high-potential companies whose stocks are falling in value, you boost returns and minimize your risk of losing money. In this way, to invest in the stock market in the long term, it is basic and necessary to be a patient and calm investor. Do you identify with this investor profile?

What is the long-term return of the stock market?

When you talk about the stock market, you are talking about stock indices. These indices are nothing more than a weighting of many companies with the largest market capitalization in any country. As we have already told you that the stock market is volatile and dynamic, every month new companies enter and others leave, since this index always has to represent the companies with the greatest wealth. In this way, if you invest in the stock market in the long term, the profitability will not depend so much on how much you invest, but more on the political and/or economic situation on a much larger scale.

The thing changes if we talk about investment in individual actions in the long term. It is important to understand that all these actions have a cycle, which begins with a takeoff that gradually accelerates. Once it stabilizes, it reaches the maturation phase and, unless the company in which you are investing does not launch new products or services, it will enter a final phase, which is that of decline. Stocks follow a similar cycle. In this way, only the shares of those companies that know how to adapt to the new times and the needs of the market are the ones that see an increase in long-term profitability.

Tips for investing in the stock market for the long term

The purpose of investing in the stock market in the long term is simply to achieve a high return. For this reason, you will have to find and follow a strategy based, among other things, on perseverance, to achieve it. However, we leave you a list of tips that you can follow to get the maximum return on your investment. 

  • Before investing, make use of reason and logic

First of all, we call for the use of common sense when it comes to investment. It is essential that, regardless of the financial product you buy and with which you decide to invest, you always use reason and logic. We start from the volatility of the stock market as a base. Reason why in case the investment does not turn out as you expected or wanted, the best thing you can do is recover as much money as possible and draw lessons for your next investment.

  • Make more investments with your earnings

In this same line, we also recommend that you not get carried away by the moment and by the possible good results. We advise you to separate an amount of money from the dividends and reinvest it several times. That is, make use of part of the profits to reinvest, and thus you will not be "putting all your eggs in the same basket" and you will be avoiding greater potential losses. In the investment world, the accumulation of money produced by reinvesting part of your dividends can increase your assets.

How to reduce investment risks?

There is indeed no risk-free investment, but there are things you can do to minimize these risks. One of them is not to invest in companies or projects that you do not know. As an investor, and even if you are going to invest in projects unknown to you until now, you must know the managers and their way of working. This will help you know if you are investing with the right people and projects that can give you security and certain guarantees.

When investing in the stock market in the long term, we recommend that you avoid asking for credits at all costs. Normally, investors who ask for loans do so at the worst time, which is when the market is at a peak. This usually translates directly into losses. We have already told you that patience will be your best friend when investing!

Long-term investment

If you are looking to invest in the stock market for the long term, we advise you to diversify your investment, no matter how well the investment in a particular company is doing, or how well the investment in a particular company is working, since the world of investment and companies is volatile and changing. Even if you have a small net worth, we recommend investing in more than five companies that operate in different sectors and different geographical areas. Do you remember when we told you not to put all your eggs in the same basket?

As a last piece of advice, and no less important, we advise you to consider your investment time horizon. It is not advisable that you invest in the stock market in the long term, or not 100% of your assets if you are going to need money in the next five years. If, on the other hand, you are looking to invest in the long term, that is, more than fifteen years from now, it is feasible and recommended that you invest all your assets, and perhaps this is the option that will give you the greatest profitability and security.