The Secret of the Wealthy: Money Cost Averaging

Many people are asking is it safe to invest in stock market. One says, my father lost money in stock market. How can I sure I wont lose my money too ?

Most likely the father lost money in stock market because he was trading.  Trading means buying and selling stocks constantly by trying to "time" the market.  That should be left to an expert. It is not the right way of investing.

Right way of investing is long term investing. It's between ten or twenty years. But will my stock grow at 20% every year ?

No, it won't. For example, one year, your investments will fall by 20%. The following year, it will rise by 30%. The next year, it falls again by 10%. And so on. It will be a roller coaster ride. But, if you put tiny amounts of money every month over a ten ot twenty year period, the average growth will most likely be 20% per year IF-and that a big IF- you follow the simple money-cost-averaging.

Is that realistic 20% growth per year ?  Stock Market Analyst says, they did not pull this data from thin air. They based this projected growth from the history of the market 20 years ago. They found out - If the person invested small amount of money consistently in top notch companies every month, the average growth yearly was 20%. 

So, money-cost-averaging is investing small amount of money consistently each month over ten or twenty years. Only in great companies. And that's the secret of the wealthy.

Why Invest in Mutual Fund

Mutual Fund yields far higher interest rates compared to bank deposit rates. Historically,  stock market has out-performed both short and long term bank deposit rates. Unfortunately, not all people know about this effective financial management and diversification. People failed to realized that we are living in fast changing world. They think that the financial solutions their grand parents used before is still applicable today. Absolutely wrong. Why ? Before the 20th century, like 1970's or 1980's. Time deposit in banks were still higher around 8% to 12% so their parents used that vehicle of investments but the world is changing, time deposit now in banks is only around 4 percent. That is below the average yearly inflation rate.      Through mutual funds, small investors or you can also participate in this high yielding investment instruments without a headache of personally selecting and monitoring a portfolio. Mutual funds are ideal vehicles for growing money over time.  It can be used as a savings medium for retirement, education for a child, or building up a long-term cash fund for some specific financial objective in the future.

Trader vs. Investor

Are you already investing in stock market or in mutual funds ? If yes, to whom do you belong ?  Are you a Trader or an Investor ?

Let me tell you.
You are an investor if you are investing in  long term let say more than 5 years.  An investor usually invests 5 to 30 years without pulling out their money from their investments. However, if you are investing in less than 5 years term only, you are a Trader.

Now you know where you belong, but which of the two earns more ?

It depends on their skills in stock market but to win in the game surely, you must be an investor.
I strongly suggest that you don't become a Trader but an Investor.
Because, in the long term, Investors earns more than Traders.

Ask yourself, who is the richest guy in the stock market world today ?
He is not a Trader but an Investor.
His name is Warren Buffet. 
He buys solid companies and he doesn't sell them for years.