Major Benefits of Long Term Investing
Investing for the long term can work pretty well because stocks do tend to go up over time and it is much easier then simply trying to trade every move the market may throw at you. In fact here are a few reasons why long term investing can work so well.
1. Stocks Go Up
The major market ETFs show that over the long term average stock market return has been about 10% in the past. This shows us that buying a group of stable stocks in the past has been a good investment strategy, far better then putting your money into a CD.
There is no reason to believe that the long term trend of the market will change any time soon. Buying good quality companies and holding onto them has worked and will probably always work.
2. Strong Stocks do Better
History has also shown that buying strong stocks with great fundamentals is a great way to do better than the average stock market return. This is pretty obvious, not all companies grow at the same rate. The top businesses in the world will always outperform the average.
Another thing to remember is that if a company is undervalued then chances are investors will see the opportunity and buy it pushing it higher up.
3. Dividends
Dividend paying stocks can also be an extremely profitable way of making money because they add up over time. Basically a company pays a dividend to let their investors collect on a portion of their earnings.
Dividends are paid out regulary, this means that having a dividend stock is another way to get some extra income. If the company does go up then the dividend that it is paying off will probably go up as well. That mean dividend stocks can pay off an eer increasing income if you get into the right ones.
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