Once in a blue moon, you hear a success story about an individual investor making millions in a single financial transaction. Thanks to this person’s foresight and luck, they bought a particular stock when it was down, sold it when it went back up, and collected their millions. They then go on an interview tour, impart their wisdom to the masses, and retire comfortably.
This might sound nice and ideal to you, the budding investor, it almost never happens. Unless you’re a high-powered financial firm or conducting illegal insider trading, making million-dollar gains with a single stock purchase is pretty much impossible. In fact, it’s actually quite dangerous to expect such a thing to happen in such a short period of time.
Why? If a stock can increase in value that quickly, there’s always the chance it can decrease just as fast. Most importantly, investing is all about patience.
Will you make millions on the stock market?
You might see some monumental gains over time if you conduct the best research and pick the right stocks. The keyword here, however, is “time,” and lots of it. If you start investing with $1,000 or even $10,000, chances are you’re not going to multiply your money by any major factor in a week, month, or possibly even a year. Yet if you hold on to your investments for decades and cash out in the distant future, you could end up being one of those aforementioned success stories.
All you need is patience.
If you invest in a stock, you’re investing for the long term. When you see it go up significantly, your first instinct might be to sell it before it could go back down.
This is a terrible idea.
If a stock goes up from the purchase price of $100 to $120, you’ve made a profit (gain) of $20. That same stock, however, could increase further in the future well past $120. By selling at the $120 point, you’ll deprive yourself of any potential future gains.
You also probably don’t want to invest for the here and now. While the idea of having $20 more now is nice and all, that $20 could be worth hundreds, if not thousands, of dollars later in life when you need it most. Investing isn’t just for retirement, but it sure helps when you get older, want to work less, and live the same comfortable lifestyle without putting in all the effort. If you invest with an eye towards the future instead of spending your gains today, you’ll end up with significantly more money down the line.
How do you invest in the long-term?
Buy stocks, keep watching them, and sell them years down the line. Compulsively checking your investment account is a habit of most investors. Yet if you’re not selling your investments any time soon, you really don’t need to worry much. If a stock goes down, there’s always the chance that it will go back up again. If a stock continues to decrease over a long period of time, you could consider selling it after looking into analysts’ predictions of its future.
Index funds are excellent long-term investments, as they historically increase over time. They might not make you hundreds of millions in gains, but they’re fairly low in risk and one of the safest bets you can make on the market. (For more on index funds, read our guide here).
Be patient and wait years — not weeks — to sell your stocks. By sacrificing what you want now for what you want later, you’ll likely end up with a nice, sizable sum waiting for you in the future