Risk Management, Trading & Portfolio Strategies

Why long-term investments may reap the biggest rewards

Long-term investing may be the better option for some individuals.

Long-term investing may be the better option for some individuals.

You've undoubtedly heard at least a few stock market windfall stories in which someone gets in and out at just the right to make themselves wealthy for life. While it's possible to time the market, get lucky and make a killing in a boom cycle, the probability of such an event happening is low. 

We live in an on-demand society, and many people expect the same quick return in stocks as they receive in other aspects of their lives. According to Motley Fool financial analyst Morgan Housel, stocks are currently held for an average of seven months. This trend of short-term investing shows that many stock holders quickly grow frustrated with a slow market. 

In his Motley Fool column, Housel said that investors cannot expect to get a substantial market return if their timeline is measured in months. 

"In the short run, stocks are bucked around by fear, greed, rumor and drivel," Housel wrote. "Only when stocks are held for years — many years — can you be reasonably assured that accumulated business value will be reflected in market returns. The longer you hold them, the more likely it is that solid average annual returns will materialize, and vice versa."

As long as there has been a stock market, there have been boom and bust cycles, and it is unlikely that will change in the future. In order to keep your investments safe from market volatility, you should use Smart Stops' investment portfolio management software to help you make educated decisions about your holdings. 

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