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Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Monday, June 12, 2006

Benefits of Long Term Investing in the Stock Market

Many believe that the stock market is a risky place to put your money, but when you examine it closer and look long-term the opposite seems true.

The stock market will have its bad periods (e.g. downturn of March 2000 and post-9/11), but fixed-income investments can also have periods of poor performance although considered less-risky than stocks. But when you look at long-term losses they typically can be recovered after a downturn in the stock market.

If you look at the period from 1926-2000 and break it down into one-year periods; five-year periods and fifteen-year periods you will see some interesting results.
  • 75 one-year periods and 21 resulted in a loss
  • Increasing the period to five years only 7 of the 71 overlapping five-year periods resulted in a loss
  • In the 61 overlapping 15-year periods from 1926-2000 there were zero that resulted in losses
So you can see the longer your time horizon the less your chances of losses to occur over a long time horizon.

3 Comments:

  • At 6/13/2006 3:50 AM, Anonymous Rick J said…

    I have been following a site now for almost 2 years and I have found it to be both reliable and profitable. They post daily and their stock trades have been beating
    the indexes easily.

    Take a look at Wallstreetwinnersonline.com

    RickJ

     
  • At 6/13/2006 4:27 AM, Anonymous Rick J said…

    I have been following a site now for almost 2 years and I have found it to be both reliable and profitable. They post daily and their stock trades have been beating
    the indexes easily.

    Take a look at Wallstreetwinnersonline.com

    RickJ

     
  • At 6/14/2006 11:15 AM, Blogger Honest Abe said…

    What kind of screens or criteria do you use to pick stocks?

    Honest Abe

     

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