Time horizons for investing
A common investment term you are going to hear while investing, either in stocks, bonds or any other type of investment is the “time length”. This is important because it gives us a time frame on when are we going to profit from our investment.
Key: Before you make an investment, you must know your time horizon!!
It is really critical that you keep your mind focused on the time horizon you want to keep your investment.
One of the hardest aspects of investing is keeping your emotions in check!
Many big mistakes happen because you sold your stocks too soon, or sometimes too late. The best advice is to keep your emotions aside and play solely by the numbers and projections you calculated.
Here is a picture that describes exactly what an amateur investor goes through that lead to failure.
You will understand some of the concepts used in this image as we continue through the course, save this image it will be a reminder of things not to do in the future.
General guidelines Wall Street use:
Up to a 1 year
2 to 5 years
5 or more years
We disagree with the general guidelines. Here is ours:
Short-term – Up to 2 years
Intermediate – 3 to 5, maybe even 6 or even 7 years
Long-term – 7 years or longer (10 to 30 years)We disagree because selling your stock in less than a year will make it a trade not an investment.
Set up your time frame for your different investments, this will help you to keep your head in the game and avoid many mistakes investors make. Always focus on the BIG picture. You can see that stocks have outperform any other type of investment over the long run, there is a ton of money to be made here.
-Stocks have shown to be the best investment over a long period of time!
The graph shows the return of a single dollar invested over time compared to inflation, bonds, Gold, Treasury Bills. Stocks clearly outperformed all the sectors over time.