How’s Your Gut View On All Your Investments?

How’s your Gut View On All Your Investments?

Do you know that there are two kinds of investors out there in the market and these two different types of character will actually determine if you can make money in investments in the long run. So who are they?

Note: The kind of investment I am talking about here is normally for index funds and not those individual stocks.

1. The Sit-Wait-Invest-Withdraw-Complain Group

Common traits: Based on my observation with some of the clients that I have met. They are those typical “uncles” type who normally invest with a few friends. They:

  • Do not time the market but rather will observe a certain fund,
  • Wait for the prices to go up and up
  • Once their gut feel is that this type of fund will sure make them money, then they will invest
  • (most of the time) once there’s a market correction, be it for a long or short term, instead of waiting, these people will cut loss and sell everything off and make a big fuss that they lose money in investments.
  • But are still willing to go in for the next round

Their typical investment graph is this:

Oh no! The Stock Market Is Going Down
Oh no! The Stock Market Is Going Down

2. The Study-Observe-Invest-Endure-Smile Group

Common Traits: Also based on my observation is that these people are normally rather quiet and composed most of the time. They:

  • Normally will invest alone so as not to get affected by hearsay
  • Will study the companies, potentials and future prospects of the fund that they plan to go in
  • Will normally buy while the prices are rather low and will observe how the market will work for them
  • Will endure through any market corrections, be it in long term or short term
  • Will typically invest for the long term because they understand the nature of the market and most of the time, they profit the most.

Their typical investment graph is this:

Oh Yes! The Stock Market Is Going Up!
Oh Yes! The Stock Market Is Going Up!

What’s The Difference Between These Two Types And How Will A Change For You Today Benefit You?

The main difference between them are quite a few but the main and most important difference is the timing that both take. Ask yourself this question, “Are you always waiting for the right time to enter the market?”

If you answered a yes to that, most of the time you will stand to lose! Why is that so? Simply put is that, the common nature of any investment graph (for any index fund) is normally upward climbing like the second graph as seen above.

The reason for the climb can be summarized due to two factors: 1. Inflation and 2. Demand and Supply. With these two factors in mind and in play, the first graph that you see above is actually on a short term basis and a small part of the big picture (the second graph).

Also, if you do time the market to go in, you stand to lose a lot also because of the fact that “what goes up must come down”, so if you do wait for the price to stabilize and slowly climb up, your gain is actually the shortest term and not of the full potential. Also, if you actually go in at the wrong time, instead of the fund going up, it goes down, your loss is there.

If you do your study well, you will know that there’s no perfect timing to go in; As long as the index fund is of a good mix, go in early and either you sell it off as you gain (this gain is bigger) or you ride through the wave for a even bigger gain.

Do Not Take This Advice Plainly

What is being discussed here is for your general knowledge and do not apply this to every single index funds you see. If you are planning to go into any investments, please do your own study of your chosen funds as well as understanding your risk appetite and your time horizon before you go into it.

Investment is always a good way to make your money work harder but always do learn how to do it smartly!

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