"Invest for the long term" has to be one of the oldest theories in the stock market and I think everyone has heard of it, most probably at the beginning of their investing journey.
The theory is simple: the market is always bullish (moves upwards) in the long run, and investing for the long run will provide good or even unexpected positive returns in the future. I call this long-term investment theory the simplest yet a bit complex theory as everyone knows about it, many believe in it, but only a few follow.
As the mindset of each individual is different, their strategies are also different. This is a very simple and highly effective theory but many people do not apply this in practice. There is no need to panic thinking about where the NEPSE index will move if the investment is done for the long-term. However, it is not necessary that the NEPSE index and the portfolio of a person move in a similar direction. If the investment is done from the perspective of long-term investment there is no need to panic or get excited by the erratic movement of the NEPSE index. This theory suggests that it’s more important that people watch their portfolio than the NEPSE index.
One thing that is certain in the stock market is that the market is supreme; no one can predict and no one can time the market. The thing people can do is be well aware of their investments, do their study and due diligence, minimize risks, etc while investing in the stock market. The long-term investment automatically minimizes the risks to some extent. Some people prefer long-term investment while some prefer short-term investment, the preference is derived from their mindset, thought process, knowledge, experience, risk appetite, etc.
The following two famous quotes illustrate why only a few follow the long-term investment theory even though almost everyone knows and many believe in it:
“We always overestimate what can be achieved in the short term and underestimate what can be achieved in the long term”.
“Most people are optimistic in the short term and pessimistic in the long term”.
Article by Rojin Joshi, an avid and optimistic investor.
Disclaimer: The author takes full credit and responsibility for the views presented in this article. Sharesansar does not endorse a particular investment strategy over another. Securities markets are prone to volatility and erratic behavior. Reader discretion advised.