Beware the Bull: Seeking Instant Gratification in Stocks Is a Recipe for Disaster
In today's world, speed is everything. From shaking your screen for 5-second videos to 1-minute ballets and websites loading in 3 seconds, the pace of life has accelerated.
Instant messaging has become the norm, making everything faster and more convenient.
While technological advancements have undoubtedly made everyday life easier, they present a challenge for us as investors. Recognizing this impact early on can help us avoid the pitfalls of impatience while investing.
Regrettably, the financial markets are the least forgiving when it comes to impatience, instant gratification, or demanding swift performance, be it from an index or an individual stock.
In the world of investing, patience remains a virtue, and haste can be a costly companion.
Source: Tarhan
It is hardly surprising that the average holding period for a stock (or ETF or Fund) in a portfolio has fallen dramatically over the years, to a record 6 months.
Imagine such a short holding period in the last few years (2022, 2023) where the market went through a bit of a roller coaster. It was nearly impossible to lock in returns with a 6-month holding time.
Assuming one did manage to lock in profits with such a short holding period, what are they likely to do with the profits?
Probably reinvest, incurring additional costs such as commissions, fees, and potential market-timing pitfalls.
This approach risks compromising the fundamental benefits of investing in the stock market: the invaluable factors of time and compound interest.
Source: NYU
Above I have indicated the characteristics of the 3 main asset classes — stocks with S&P 500, cash, and bonds. When it comes to managing the most challenging asset for human beings—stocks—there are key questions that warrant
Read more on investing.com
