stock market investment, the best investment
It is known that the majority of drivers are sure that the drive a car better than others. Not all investors are investing worse than others, but many. Next I will show that invest better than most of you can already now and without significant time costs on training and continuous reading of the news, review quotes, charts, etc.
In other words, a step forward, a step back, if you just wait, so many years later, these spikes («bubbles») and failures (as well as the current crisis) have no value. We as humanity are richer (because of a growing population, life expectancy and productivity).
In practice we want to (live!) today, we want now... Here's what it looks like, if the people «to give» (hehe!) the stock market.
The desire to buy or sell the majority appears already after a period of prolonged growth/fall. First - greed, then fear. If the detail, the picture consistently described our emotions: uncertainty -> interest> confidence (here we start to buy) -> greed (buy) -> question -> fear (sell) -> regret (when the price has gone back up again).
Outcome: to buy expensive to sell cheap. Long-term growth of the market has its place, but at best, we are not losing the sub...
In terms of figures, it looked like that. The average investor in mutual funds shares in the U.S. for 20 years earned 1,87% per annum (Dec. 1989 - Dec. 2008). Forget about inflation, our investor has received less than the risk-free Treasury bills of the government of the United States! At the same time the average annual yield of the S&P500 index amounted to 8.4% per year (source: the «Index Fund àäâàéçåðç»).
Who earns from our mistakes?
Intermediaries (who receive a Commission, regardless of whether we lose or earn). With them it is clear, they will always, you only need to understand how much, to whom and for what you pay (see, for example, here, here and here).
Other investors, which is lucky guess or predict the movement of the stock market. And lucky in both cases. Even if you have experience, knowledge and skills, markets can always surprise. Being right is not enough. You need to have the time to market confirmed your choice before you lose all the money (remember the classics: «the Market may be irrational longer than you will be creditworthy» - j. M. Keynes ). Systematically successful investors little. Counted on the fingers.
The third category, the more disciplined investors. Not all are lucky in money and not all are fortunate enough to be intermediaries. Not everyone will want to devote myself to the financial markets and the science of investment. And here is the disciplined investor become available to everyone.
Let's imagine that we don't watch the news, don't react to the UPS-and-downs, are confident of the bright future of humanity and the inside of the «Chinese wall» between our brains and money:
The principle of «buy and hold». Such an investor does not spend nerves, calm and always buys. He eventually gets, if invests so many years? The average growth of the market of which says Buffett, minus costs (commissions, expenses).
But this is not all. If we have enough wisdom discipline sell that rapidly grew and buy, that fell in price, we go against the crowd and avoid unnecessary risks (financial «bubbles»). For example, «preserving» the earned money in the stock and invest in the bonds. The investor little of one class of assets, for example, Russian or American shares. Need stocks, bonds, commodities, real estate funds. Market one little countries, require an international diversification. In this approach is the principle of portfolio investment, diversification and timely ðåáàëàíñèðîâêè. It is a way not only to get rid of fear and greed, and generate more revenue per unit of risk. Or invest less risky at the same yield. So, invest better than most:
Outcome: diversify, invest for a long time and continuously, ðåáàëàíñèðóéòå and watch costs (choose intermediaries).
