Why investor do not care for market drawdowns?

25 сентября, 2021 от fake Выкл

Many newcomers, coming to the stock exchange, worry, no matter how to lose their capital. But subject to certain conditions of capital loss — the case is quite difficult, almost impossible.

So, what conditions do we need to follow us?

It is necessary to be an investor, not a speculator. About the difference — see my article «

No credit shoulder — buy strictly for your money.

Attachment horizon — at least 5 years. It is desirable, of course, have even more distant goals.

Invest in solid companies with respectable history and clear prospects.

Diversify investments by industry and by companies.

So why, when complying with these conditions, it is so good to be an investor and can sleep well?

There are a lot of reasons. To begin with — the lack of a lending shoulder allows you to wait for any storm in the market and does not force you to sell paper when falling, no matter how strong it is.

Since the horizon of your investments is many years, then the sudden need to make money from the brokerage account will also not make our papers at the bottom.

Buying only solid companies (mostly blue chips), which is definitely not threatened with bankruptcy, allows you to safely look at any time drawdowns, even if the market falls into the red zone and your shares are terribly cheaper, and the application shows that a terrible loss on the brokerage account.

The fact is that your loss is virtual, «paper», not real. You bought a number of shares — «share» — in an excellent company. And your share in this company did not decrease in this company. And the market in this case, by the metaphor of Benjamin Graham, behaves like a crazy neighbor, who shouts the price of your home every morning, which you are not going to sell. Today, this neighbor screams that she will buy your house for a million dollars, and tomorrow I yells, which will buy for a hundred dollars — but you are not going to sell, and you are not going, so «deposit» of your home happened only in his inflamed brain. Similarly, with shares. Since you are not going to sell them, today’s assessment by their market is not worried about you — the company is still good, still pays dividends, and the storm on the stock exchange is a problem for speculators, and not for investors.

For an investor, the fall price of the stocks below sound values is always only the opportunity to buy at a low price share in good business. Because the investor, unlike speculating, buys a share in business, and not an object for speculation.

This is a very important point — the perception of your shares is like your share in the company. In this case, you can generally distract from their assessment by the market, but to evaluate them themselves. Answer yourself for questions: «Is the company good? Does she bring me a dividend income? Is its financial position stable? Does she have prospects? » And if you are responsible for these questions positively, then what is the difference that you think about the cost of your share in such a wonderful company foreign people from the market? You are not going to sell this share.

On the contrary — you are going to own these promotions for a long time and get a profit from them, while sooner or later they will not make you a real millionaire)))