We all know that stocks outperform the “safe” options — savings accounts and bonds — over the long term. A recent study found that the stock market’s average annual return is 10%. That’s more than you can get from a bank account (it’s rare to get more than 1%) or bonds (if your bond payout is at least 4%, you’ve done better than average).
So why do so many investors and traders fail to earn that return, despite investing in the stock market? Because they don’t stay invested for long.
It’s Important That You Stay Invested
The stock of the best companies tends to go up in value gradually over a period of time, so you need to stay invested in order to actually see the returns. More time in the stock market also gives you the opportunity to collect dividends. If the company pays them, but you trade the stock on a daily, weekly, or monthly basis, you can kiss those returns goodbye because you likely won’t own the stock at critical points on the calendar to earn the payouts.
If that hasn’t convinced you, consider these stats. Over a period of 15 years until 2017, the market gave about 9.9% annually to those who stayed invested. But if you missed even the 10 best days in that period, your returns dropped to just 5%. If you missed around 20 of the best days in the time period, your returns dropped to only 2%, and if you missed the 30 best days, you, in fact, lost money.
The Way Forward
Now that you know what the secret to staying invested in the stock market is, make sure to do some research and open a brokerage account for yourself. Once you have a few stocks on hand, make sure that you don’t sell even if the market dips, as it often does. Over a period of time, after your stocks have risen to a price you are comfortable with, you can go ahead and sell them and make new investments.
