If you are planning to invest you money into the market, or have already invested with a goal to achieve capital appreciation, staying invested makes more sense than moving in and out of the market. Every good financial advisor preaches and practices the mantra – “time in the market is more important than timing the market”.
A lot of investors make the mistake of abandoning their financial plans at the first sign of bad news. Instead, one would do well to take a macro perspective and realize that over the years, bull markets have lasted longer than bear markets. It is also interesting to note that on most occasions, the upward rallies have easily made up for short-term declines.
More Reasons for Staying Invested:
Sense of Discipline: Staying true to your financial plan inculcates a sense of discipline towards long-term goals. Regular investing is probably one of the most critical aspects for wealth-creation.
Benefits from Compounding: The mathematical reason for staying invested was well articulated by Albert Einstein, who said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” Give your money the time to grow. Let it work as hard as you do.
Benefits from a Full Market Cycle: Understanding the markets is easy, timing them isn’t. We do know that markets tend to follow a cycle of ups and downs and bulls and bears. Staying invested allows you to participate in the rallies. This is an opportunity to buy low and sell high because in the long-term, the good schemes have always delivered positive returns.
Leverage Long-Term Strategies: When you agree to stay invested for a longer duration, you give yourself the opportunity to benefit from the long-term strategy and vision of an experienced money manager or mutual fund manager.
Tax Benefits: Long-term capital gains arising on the transfer of units of an ‘equity oriented’ mutual fund is exempt from income tax. Moreover, investments in Equity Linked Saving Schemes from mutual fund houses are exempt u/s 80/C of the IT Act.
The MF Route to Long-Term Investments
A dynamically managed mutual fund is one of the best investment vehicles for retail investors looking to gain from long-term investments. An Asset Management Company offers various schemes that pursue different objectives. These schemes are actively managed by experienced fund managers who follow a well-defined investment style and proven processes.
Systematic Investment Plan is the best mode of long-term investment for a retail investor. An SIP allows you to make the most of a bearish market as you gain from rupee cost averaging.
It is all about the Mindset
Staying invested and periodically reviewing your financial plan has proven to be one of the surest ways of creating long-term wealth. When investing in uncertain times, following the basics is the best way forward.