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Investment Takes Time

2011 Sep 9

All things worthwhile take time. Investing in some form of business or any form of stock, one must 
accept that the money and effort put in will reap a harvest, not immediately, but after some time. This usually takes years, but for some stock investments, especially when one is buying or selling them, one may be able to make money after just several weeks. However, one must be vigilant about one’s investment. Remember, investing in any form has its own risks, and one must be prepared to accept these risks. These are educated risks, nonetheless, as one always has to be careful to protect against loss. 


In this day and age investment can take on many forms. For example, there are mutual funds of different types, exchange traded funds of varying categories, businesses of many forms, real estate, banking investment, etc. All these forms of investment operate on the same basic principle: Investing money into them, one expects a return at a later time. Time here is usually measured in years. The longer the investment horizon (and the higher the amount of investment), the higher the expected return. 


Investments are used by individuals, companies, and even governments. They put in money and expect to gain from it. For these same people and institutions, they know that there is never a rush in any form of investment. For some dividend stock, for example, they may make money quarterly or annually. For buying and selling shares of stocks, they may earn after several months or even years of owning the shares. For real estate investments, they may only see the return after several years. For some business, one may see only the fruits of one’s investment after a few years.


Returns from investment are usually used in investing again on the same business or channeled to a different type. This is how money grows in investing. For instance, money gained from selling shares of stocks may be used in investing in an exchange traded fund or mutual fund or vice versa. Investing in any business always takes time and one has to be prepared to wait for its gain. It is a gain always worth waiting for.


That’s why investment period is very important for the investment strategy, which may depend on many factors. Like investment strategy by age, or other personal characteristics. But the period is the main thing. All asset allocation depends on it, for example, if you are investing for:


<1 year. Only money market investments.

1-3 years. Most assets should be allocation in to money market investments or short term bonds

3-10 years. Assets should be allocated between mid-long term bonds and some less risky equities. 

>10 years. Portfolio assets should be allocated between long term bonds and stocks. 


These are very rough estimations and do not fit for every investors, but you can see that investing is long term process and you can’t expect quick result in this area. Of course it is highly probable, if you will invest only in stocks during bull market and get yourself in stock rally, the results will be quick, but that will be more like winning in a lottery than real investing results. Fast results may come only from speculations, but not from long term investments


So if you are ready to invest, you also have to be ready to do it for long term or you have to choose proper vehicles.



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