The recent stock market crash on worries surrounding a possible global coronavirus pandemic presents an interesting opportunity for investors who consider themselves rational rather than mood, as investing amid widespread panic requires some strength of character and determination to move on with the Then Numbers still in erase the since.
One of the main reasons why experts say that this is a good time to enter the market is that valuation ratios such as price-to-earnings ratios or price-to-earnings ratios have been at high levels in recent months and this indicated One possible overvaluation of shares.
Due to the recent drop in valuations, these indices are like these when a new one is made by more conservative levels, leaving more room for potential appreciation of these stocks in the future.
To guide those tempted to take advantage of this opportunity, we present some expert advice for investigating stocks that may be helpful in achieving the goal of progressive wealth creation while using these tools.
Short-term versus long-term
Warren Buffett has always attributed the success of his investing career to a very simple principle, which he himself summarizes as follows:
“Pick good stocks when the time is good and hold onto them for as long as possible as long as the company remains a good company.”
From this sentence, like each other and important clues and the strategy that billionaire investors can, and the first to point out the value of investing with a long-term perspective.
An investor’s best ally in Died Died times, as long-term investments tend to generate much more stable and predictable returns than short-term investments.
In fact, statistics show the historical return on an investment in the S&P 500 index (one of the world’s most popular stock indexes) from 1964 to 2016 was 9.7% per year (including dividends).
A To illustrate the monetary implications of this fact, had an investor invested $1964 in the S&P and reinvested the dividends earned, their investment portfolio would have increased to nearly $123,000 by the end of 2016
On the other hand, the index has ended some years with negative returns, during which a short-term investor can suffer losses of up to 30% of his capital, and this shows the contrast between a short-term investment strategy and a long-term focus.
The importance of compound interest
The Compound Interest was defined by none other than Albert Einstein as “the most powerful force in the world,” and it’s no wonder.
The concept of compound interest is quite simple and can be summed up as an exponential increase in investment returns over time due to continued reinvestment of earned dividends.
The importance lay in the fact that money is needed to generate more money and reinvesting dividends therefore increases the Invested Capital Base to gradually and progressively increase annual income.
passive investing
The rise of instruments and stocks like exchange-traded funds (ETFs) and index funds gave way to an investment strategy called “passive investing.”
This type of investment offers many advantages linked to the above strategies, since on the one hand they are low-cost investment vehicles since the companies that issue them charge investors very low annual fees (usually less than 1%)
On the other hand, these instruments allow the investor to relax and let his investments work for him, on the portfolio composition of the index funds is managed by trained financial professionals.
In addition, some funds offer investors the ability to automatically reinvest the dividends received from the compound interest to allow for investment growth.
Conclusions
The advice of stock investing masters like Warren Buffett and the matching quote from renowned scientist Albert Einstein may be sufficient evidence that long-term investment strategies based on the effect of compound interest are a solid alternative for those who want it Accumulating wealth over time means ensuring stability during the unproductive years or leaving the heirs with a good cash reserve.
