“Our Favorite Holding Period Is Forever”- Warren Buffett.
Can you understand why Warren Buffett had said that? And why most of the famous and richest investors like Rakesh Jhunjhunwala, Radhakishan Damani, Vijay Kedia, Ramdeo Agarwal, and many more investors follow this simple rule and the reason is that they understand the power of ‘Long term investing’. Now you all may be asking what is long-term investing. Let Me Explain In Some Simple Words.
What is long-term investing?
Long-term investing is when you buy a stock and hold it for over some time. Because the longer the better. The longer you are willing to stay the longer the power of compounding will show its effect.
Power Of Compounding - it is when you reinvest your interest to your principal amount to gain additional interest on that accumulated amount for a period is known as compounding
In simple words, when you don’t take out your interest for a year and gain a higher interest on that accumulated amount and by doing so you can let the power of compounding help you to become financially independent by literally doing nothing.
It is considered as 8th wonder of the world according to Albert Einstein
It is not for short-term traders who just want quick money, it is a game of investors that is played over some time.
It requires a lot of patience and strong willpower.
Short term trader just wants quick money but long term investor create wealth with the help of compounding
.
Long-term investing is comparatively less risky than short-term trading where you are required to have a piece of proper knowledge of technical analysis and a stroke of high luck in your favor to earn money. But in Long term investing it is just based on Fundamental analysis and some common sense. And that’s the reason behind the success of every rich investor out there
Why is Long Term Investing necessary for everyone?
To understand why Long Term investment is necessary lets us first understand why investment is necessary for every one of us. We all work hard to make money to fulfill our desire, our goals we all have a short-term or a long term goal. However to fulfill the goals we have to invest some money to make it grow.
The money that lying in a bank account earning negligible interest is at the end being eaten by inflation, It is necessary to invest. Investing is a habit of making the money work for you instead of working for money, which is indeed the best way of achieving financial freedom. Now let us understand why long-term investment is necessary. Here are a few points below-
Higher Returns - In a Long period you will always see that the rate of return is always higher than in the short term, because in the long term in Large companies it is almost guaranteed that they will make a good profit over some time. Compounding here plays a major role in high return because, as discussed earlier, you have to let your money be compounded for a long period to show the power of compounding.
Benefits of Taxes - If you hold your stocks or mutual funds for more than one year then it is considered a Long term capital gain tax (LTCG) which is deducted for only 10 % as compared to short-term which is deducted for 15 %. However, few long-term investment options such as PPF or ELSS allow a deduction from your income and help you save your tax to some extent.
Volatility in the Market - Volatility in a market is generally tend to give a huge concern to any investor out there but that’s not the case with Long term investor, because fluctuating in the price of stocks is generally a negligible factor for Long term, because until unless any drastic change happens in the market or any heavy change appears in fundamentals of the company, a long term investor does not have to worry at all.
Wealth Creation - Wealth is created over some time and it is not a game of the short period. Long-term investors tend to be the master of wealth creation. Because compounding plays its effect after a while and with the help of compounding effect wealth over a period multiplies drastically.
There are also many different reasons out there which are necessary for long term investment but these are some critical ones and the ones which everyone should consider once at least,
Now after learning what is Long term investing and why long term investment is necessary for everyone you may be thinking,
Which stocks to buy?
So here is our Handpicked Best Stocks you can buy for Long Term Investment,
Written By, Harsh Kumar. Harsh is an aspiring Content Writer and Enthusiast Blogger. He has a vast Knowledge about Stock Market, Mutual Funds and other Financials. He aims to spread his knowledge and make everyone financially literate. You may Follow Harsh Here, https://www.instagram.com/_harshkumar24_/
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