It’s almost cliché to say that one should invest in the market for long term. The definition of the long term varies from person to person.
For some 10 years or more is long term, for some 4-5 years is long enough, while from the taxation point of view one year is a long- term investment and for a trader maybe even a day is long term.
Long-term perceptive in every aspect of our lives is important. Quality of our lives depends on the decisions we take.
Our decision shapes our lives, so, it becomes extremely important to think well before we take any decision. You must have noticed fast decisions are usually wrong decisions especially about money & relationships. We should give a time gap between thinking & executing.
You will realize that if you give time gap between your thoughts and the actions, then you will stop indulging in impulsive purchases or wrong investment or most importantly you will stop taking wrong trading decisions.
People who are highly successful have a long-term perspective on almost everything. They give a time gap before executing their plans. This enables them to visualize the impact of their decisions on their lives 5, 10 or even 20 years down the line.
For investment in equities, one must have a long-term view. Trading is generally is associated with a very short-term view i.e. from few minutes to few days only. How can one have a long-term view in trading? If we replicate the long-term approach towards trading as well, then we will execute better trades, our accuracy will improve and we’ll stop regretting. It’s very easy for us to get completely mesmerized by the trading screen and execute a trade and then regret it.
However, with a long-term approach, you will stop chasing trades instead you’ll be able to spot great trading opportunities. When we think of trading we assume it’s a place where one can get astronomical returns in no time. However, a smart trader will have a long-term perspective. This smart trader will see how his trading portfolio will be 10-15 years from now.
While others are looking to double their money every year this smart trader will be happy with a small but consistent return month on month which will snowball into something really big in the future.
To understand how small but consistent return helps in your portfolio becoming massive, let’s take an example. If one has 15 lakhs as a trading capital, then an average or mediocre trader will look to earn at least 1 lakh or so on it every month. As a result, he will take more risk and end up losing capital and leaving the market forever.
A professional trader, on the other hand, will have a long-term perceptive, he will be looking for a small yet consistent return, even if he earns 2.5% return a month then this 15 lakhs will become 2.9 Crore in ten years. Time perceptive changes everything. 2.5% on 15 lakhs means Rs 45000 every month, for a mediocre trader this amount is too boring to even talk about however consistency & time perspective is the key here. Knowledge, consistency and your time perceptive can help you multiply your trading portfolio into something which only very few have been able to achieve. We all have heard the story about tortoise & rabbit. Tortoise even though was slow but was consistent in his approach and came out a winner. Trading is similar to that.