Investing for the Long Term

    Published: 06-16-2009
    Views: 4,362
    Financial Advisor Ric Edelman discusses the top four steps to successful investing including investing for the long term.

    Ric Edelman: So you have finally saved up some money and you are ready to begin investing. If you want to enjoy the profits that are produced by the stock market, you need to invest with a long-term view.

    Just consider the year 2007, for example. That year the S&P 500 gained 5.

    5%. Now considering that the stock market has averaged 10% a year since 1926 according to Ibbotson Associates, a 5.

    5% gain doesn't sound great. But 2007 is even worse than you think, that's because from January 1st to November 21st of that year the stock market gained nothing. That's right, the S&P 500 started 14.

    18 on January 1st and it was virtually the same on November 21st, and then from November 21st to November 28th a single week, the stock market jumped 5.

    5% and after that the market remained flat for the rest of the year. We didn't have a good year in 2007, we had a good week, and amazingly 2007 was not unusual. We had a similar experience in 2006 when the profit of 13.

    5% occurred in only 18 weeks. In 2005 the entire year's profit occurred in eight weeks, in 2004, 7 weeks.

    So if you are one of those investors who jump in and out of the market, you could easily miss out on those few weeks when the profits are really made and you could lose an entire year's worth of gains.

    The only way to ensure that you will enjoy those gains is to stay invested all the time and that means staying the course, during the five or ten years or even decades that it will take to reach your financial goal.