Stock Market Investment – Long Term or Short Term?
Having a pre-disposed long-term buy and hold stock may be a very expensive mentality. Long-term market trends have risen, but in volatile stock markets long-term returns tend to take risks rather than as large as many short-term gains. Long-term stock market investors risk and return rate greatly increased. People think that tax consequences are the reason they hold. This argument has no weight. Some people find it hard to shake off old habits and think about the stock market. Those who do not want to learn from the collapse of the market are doomed to repeat this lesson.
A few years ago, investors were told that buying and holding long-term investors was a wise move because the long-term trend of the market is on the rise. If you take any other approach, you'd better be a speculator and the worst gambler. Brokers and mutual fund managers are the main supporters of this investment philosophy. The media also joined the chorus, which became part of the "accepted" market. In this respect, the investor's mind loses its elasticity. Ignore the fact that selling stocks that have entered a high risk phase actually reduces the risk of the portfolio, whether held for a year or not. It is important that we have a clear understanding of the main issues related to investor holdings.
New fluctuations in the market may stay here. The current reality of the market is that stocks tend to experience multiple price fluctuations in a given year, where the magnitude of these short-term fluctuations is usually equal to or greater than their one-year price fluctuation. Even stocks that are losing money within a year can be very profitable several times a year. Unless the long-term expected return is much greater than the average return on equity investment, the stock price rises only 20% within 2 months, which is a high-risk gamble once its chart growth rate begins to break down. The probability is that holding such stocks to meet the one-year long-term tax requirements will cost too much. When the stock rises rapidly, they will usually greatly "correct" once they fall, once they start to collapse. It's like a crowded auditorium, someone shouting, "Fire! Everyone wants to be." Potential buyers then become waiters outside the auditorium waiting to come in. When they see all the people panic, they naturally decide to wait,
Investors' Tax Rates due to Long-term Holding Periods
There is no way to know in advance how long it should be held. We should not invest in what we think should be based on, but based on what. Although the 1-year minimum holding period is desirable for tax considerations, it is meaningless and arbitrary in the context of market behavior. In fact, our rigidity along these lines of thought can be very expensive. Of course, we want to hold stocks as much as possible, but the speed of growth and risk should not be overlooked. Stocks that have proven themselves unable to break through the resistance at the head no longer have growth potential, and the stocks held on hold are at risk of loss (the risk / reward rate has changed). In fact, the risk of loss will increase, as others conclude that the stock will not go higher.
Difficult to abandon the old investment philosophy. One thing to note is that a particular stock gives a signal to sell and the other moves away from the old way of thinking in order to act on the signal. This takes time to be internalized to the point where it is automatic. A good, clear strategy can be an effective trainer in this area. After all, lessons can be learned from every crash of stock and every market crash. Investors must learn to allow stocks and markets to give their signals. When these signals are given … we must learn to listen.
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