When it comes to investing no one willingly wants to lose money, therefore people normally invest when the markets have been going up for a while and they feel that they will make some money. When the markets turn they then tend to react fuelled by negative publicity. Losses could mount up as investors tend to panic and they sell when the markets are down. Buying high and selling low is a recipe for disaster.
Price comparison is one activity we all do at some stage, to get the best price or value for money. We compare prices between retailers and purchase commodities when something is marked down or on sale. We also purchase more when items are presented on a sale. It should be the same with your investing.A savvy investor will travel the opposite route that the crowd is travelling. For long term investing we need to be disciplined and avoid selling at the bottom and rather buy.
The reason most people don’t follow this is due to the fear that the investment might continue to go down and never go up again. But, when it comes to preserving your wealth, cash might not be king as inflation will eat away at your wealth. If you are confident in your strategy then stick it out and ride the waves up and down.
Statistical Data from Moneyweb (25/08/2016) and illustrate return on investment of R100 000.00 from 1 January 2006 to 31 July 2016 (projected statistics from Morningstar).
Over long periods of time, your equities will tend to go up and exceed inflation which in turn grows your wealth. This brings us to the end of my Blog Series - Investing 101 the Basics of Investing. If you have any enquiries or have any comments drop me a few lines below or visit me on twitter or Facebook. I am always happy to hear from you.
Author Ben Charlton
Edited by N Du Preez (Business Internet Marketing Solutions)