In this article, you will learn about the long-term investment strategy. How long-term investors always in a benefit.
LONG-TERM INVESTMENT: CONCEPT
Long back there was a king who was very kind-hearted. One day he met with a person who was a writer. The writer was very intelligent. The writer gives his books to a king for reading. The king read his books & gets impressed with the writing skills. He told the writer to ask anything from him, he will give you. When King said to the writer, he was playing chess. So, the writer asked to give him a wheat grain.
He asked King to give wheat grains as the chessboard design. And said, double the wheat grain in every box. It means king put one grain of wheat in 1st box and in 2nd it would be 2 wheat grains. In 3rd it would be 8 wheat grains. In this way, he asked to put in all the boxes & double the grains in every box.
Mathematically, the writer asked to put wheat grain exponentially ion the boxes. In the chessboard, there are 64 boxes. So, in the last box, the writer gets the wheat grain equal to 263 times. That means,
263 = 92233 x 1014 grains
Now, let us suppose, in 1Kg of wheat, there are 50000 grains. Now, divide 50000 grains with the above value.
92233 x 1014 / 50000 = 1.85 x 1014
Suppose the price of 1Kg wheat is ₹30/- per kg. So multiple this value with above value
1.85 x 1014 x ₹30 = 55.34 x 1014
Now, convert this value into dollars.
$1 = ₹75/-
Now, ₹55.34 x 1014 / $75 = 73.8 x 1012
1Trillion $ = 1012
So, it would become approx. $74 Trillion.
With his intelligence, the writer took $ 74Trillions. The long-term investment strategy is just like that. The power of compounding plays a vital role in the long run. (Read Power Of Compounding)
WHAT LONG-TERM INVESTMENT CAN DO?
In the long-term investment, holding period & rate of return is very crucial. Let us suppose you have invested ₹50000/- money in the stock market. And your money gets doubled in 6 years (@12% return). Now, look at the below growth pattern.
In the 1st 12years, your ₹50000/- grows up to ₹2lacs only.
In the next 12 years, it grows up to 8lacs which is a very good amount.
After 30years, your corpus grows up to 16lacs with just ₹50000/- investment.
But now look at the last 6years, the money gets doubled to ₹32 lacs. In just 6 years you gain more ₹16lacs. This is the glory of long-term investment.
No matter, how long you hold, the main point is, if you hold for a longer period the power of compounding plays its role. In the long-term investment, rate of return and holding period matters a lot.
HOW LONG TO INVEST IN STOCK MARKET?
Let us consider an example of Reliance Industries Limited. If you look at its last 1year chart from 10 June 2019 to 09 June 2020, you will see that the initial price was around ₹1.3K. And the ending price somewhere around ₹1.5k.
There is the lowest price also where the value of money has eroded but soon it recovers to 1.5K. The one-year span of investment is typically a short-term period where the risk is more of losing money.
Now, see the last two years’ chart between period 11 June 2018 to 01 June 2020. The initial value of share price is somewhat around 1K and the final value of share price near about 1.5K. This two-year span also considered a short-term investment period where you may lose but better than a 1-year investment.
Now, look at 5 years span of Reliance share price chart. There are always ups and downs in the price. This span is between 10 June 2015 to 10 June 2020. In this span, the initial value of the share price is around ₹500/- & the last price is near about ₹1.5K. In the Indian stock market, the 5year investment span considered a safe period. But it is only of you have invested your money in good companies.
Warren Buffet the richest investor, invest his money in very good companies by considering investing forever.
So, if you really make an investment in the stock market investments for a longer period. There are few traders who trade every day and increases their corpus, but they never equal their investment income with long term investors.
WHERE TO INVEST?
A long-term investment is a strategy to buy assets that grow faster & give good returns in a longer period. The long-term investment is directly linked to your net worth. If you buy such income-generating assets it will increase your net worth.
Stock Market Investment
There is no other investment tool that grows faster than the stock market. Some stocks go up and some do down in the market. But quickly the market goes down the same way it came back to its original value. In the stock market there are no. of chances you may get your investment to increase 10x, 20x, 30x, or many folds.
Below is the list of companies who were down in the march -2020 during Covid-19 hit India. Now look at there returns percent from the march.
SIP is a kind of solution that is given by the mutual funds to invest for peoples who do not want to invest money directly into the stock market. The power of compounding plays a vital role in SIP investment. You can check the SIP investments by using the SIP calculator. Click to use.
Everybody wants gold but it looks expensive every time we think to buy it. It was expensive when its prices were ₹5000/-, it was expensive when the price was ₹20000/- and now it is also expensive at ₹46000/-. A few years later it also looks expensive when it touches ₹55000/-.
So, make your decision for better investment at better prices.
There are no. of other investment options that can build an income-generating asset. Click to read the best income-generating assets.
Long Term Investment is always a perfect way to become rich. There are no short cuts to become rich. You must give time to your money to grow if you really want to rich.
Always remember these expressions, “slow and steady wins the race” and “No pain no gain”.
With the 1st expression, you must give time to your money. Money works for you & help you to become rich. The 2nd expression is for the patience you must show. There is pain behind patience. And in front, there is again.
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If you give time, show patience & consistent in investing than nobody can beat you. You will become rich.