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History Of The Stock Market

History Of The Stock Market

When speaking of the history of the stock market it is in reference less to the actual founding and regulations created to manage infrastructure and more about taking a long view historical perspective of the stock market and its relative performance.

Over the last 100 years individual stocks have averaged an annual gain of 17% which leads all other investment vehicles in returns. This annual figure includes such historical market corrections as Black Monday and the stock market crash of 1929 which preceded the Great Depression. It is important to remember that when investing in stocks it is best to take a long-term perspective. Much like living in a home, which is also an investment, do not purchase stocks unless you plan on owning them five years or more.

The stock market historically has experienced numerous cycles of bearish and bullish activity and often the cycles are evened out if investment timelines are focused on long-term gains. That's not to say an investor will never lose money in the stock market as the unforeseen can happen such as corporate bankruptcy and personal emergencies which force stock liquidation. But if good stocks are purchased at fair prices with a long enough time horizon the odds of positive returns significantly increase.

One technique to maximize returns over the long-term is to invest using dollar cost averaging. Dollar cost averaging simply means making repeated purchases over an extended period of time with space between each purchase. So while some shares may be purchased at a high other shares will be purchased at a low which allows averaging out the basis of the stock purchases. More shares can be purchased when the price is cheap and less shares were purchased when the prices are high. This only works when purchasing a variable number of shares with a fixed investment amount, such as $100 per month.

A common mantra preached by numerous investment gurus and advisers is that investors should never try to time the market. Buying stocks on hype and selling stocks on fear and timing the market leads to significantly lower investment returns in both the short and long run. Pick an investment strategy, re-balance your portfolio annually and investing for the long-term will help in securing a prosperous financial future.