There is evidence that average holding times have fallen from five years, a decade ago, to less than a year In recent times, according to data extracted from the London Stock Exchange. Whether or not to invest in the capital market is a matter of personal attitude towards the corporate reality. If the answer is positive, the companies in which to invest and designing an optimal portfolio investment is a matter of calculations.
Differentiating risk is often difficult and an investor should be acknowledged that there is no zero sis in trading with securities. Even corporate bonds, which are considered rissoles In the capital market, are exposed to political risks that are outside the scope and laws of the capital market. Behaviorist’s strongly believe that stock markets do not respond to corporate reality, but rather to investors’ moods (Louis Couchette, 2001).
The group behavior they have keep the trends, sometimes artificially and often lead to losing positions; the overestimation of their Investing skills repeatedly make them reluctant to give up on a falling stock and/or to admit a loss. Investors on the capital market seem to be more gamblers than reasonable traders. The logics that should follow a reasonable stock investment is similar to the story that once Ronald Reagan said: “Don’t just do something, stand there” . Investing In the stock market is said to be the best for the very long run.
Every individual has their own Flanagan goals, but as a whole everybody alms at higher return on Investment which possibly be non-tax deductible In most countries. Long- term investment portfolios are perhaps the only means for realizing a two-digit return. Deposits rarely give more than 5 per cent and usually these are outweighed by the inflation. Long term stock investments are recommendable for most people, not only professional investors, as usually they do not require good and effective timing of the market.
It used to be a safe option that investor advisors give to people as on the first place: all boats must rise over the long term; and second – even experts on the capital market have no proven Idea of how to classify timing elements of the stock market. Long term investments realize a dividend income, which for the last twenty years aired about fifty per cent of the total real rate of return , according to Barclay Capital. Unlike short-term speculators, long-term Investors tend to benefit more form the tendencies of the markets and of the economy as a whole as share prices may rise in the long term.
Ian Cookie (2012) analyzed the Barclay’ Investment Banking research of performance of shares relative to changing composition of London Stock Market with the returns of both cash deposits and gilts for the last 112 years. The results were clear that the return of stocks was higher than that of the deposits and lilts realized despite such striking downturns as the world wars and the Great depression. What was voluble from this research was also that comparing the decade gilts and the deposits became smaller with shortening the time horizon. Either passive or active investors represent the capital market.
Passive traders have the belief that it is impossible to follow top market benchmarks at a reasonable cost so that to outweigh the cost and effort related. These investors simply try to double and triple particular operations, which they see as universal. Active traders aim at higher than average performance and that is why they are constantly trying to beat the market. During times of volatility, these investors try to keep on the very short- term trends and trade aggressively often led to negative outcomes. Active managers are proved to fall under their standard positions by all costs that are incurred for running their business.
This practically means that there are many costs related to opening and closing positions on the stock market that even successful are overweight by the costs of these activities. Passive players on the market rely on the suggestion that the capital market works according to the efficient market hypothesis – the prices are fair and quickly adaptive to new information. Therefore, according to passive investors, none investor can manipulate pricing as they would be inevitably corrected by the market. On the contrary, active players rely on the idea that market imperfections make it possible for the investors to effectively manipulate it.
