The average investor is based on financial preferences determined by his risk profile trying to get a return from his savings and then almost always looking for the best investment decision.
L.and financial decisions must be based on two pillars: where to invest and what to invest.
At this point, your risk profile also plays a role and you usually try to learn the best investment strategy with the smallest risk.
Statistics in the historical series stipulate that buying shares and buying stock indexes and maintaining them for a long time increases the chance of getting a positive return. In this way the risk is more controlled.
How long is that "long term"?
What is the ideal asset allocation to maintain?
The solution is geographical diversification.
The analyst's recommendations suggest keeping this asset:
51% of the American stock exchange
30% European scholarships
20% of Asian markets and developing countries.
Then what can be the best investment for the next 10 years?
Among the many opportunities today we focus our attention on stock investment.
Statistical calculations on the Wall Street historical series from 1898 to 2007
Entry at the beginning of the year and exit from investment are established at the end of the tenth year.
The probability that a 10-year investment horizon starts on the Wall Street market in any year, a positive performance is 87%.
The average return for a 10-year investment is around 120% with a positive 93% probability.
To make money on the stock market, therefore, the secret is to maintain investment for at least 10 years. If, in addition to the stock index, you are also investing in stocks that faithfully replicate benchmarks, the results can be increased by releasing dividends.
How is Wall Street related to other financial markets? At 76% and this means that more or less the same results are obtained in all markets but we emphasize that geographical diversification is recommended as described in the previous paragraph.
How to invest money without taking risks?
There is no risk-free investment when looking for returns above the average. The higher the result, the more likely it is to suffer losses.
During this decade, capital can be eroded by huge losses due to the physiological ups and downs of the stock market.
Here are two examples from the past few years:
those who invested in early 2001 on Wall Street in the following two years saw their savings go down by more than 30% and then go up and earn 13% through 2011;
those who invested in early 2007 in the next two years saw their savings go down by more than 45% and then rise again and yield almost 100% until 2017.
The conclusion of this study is very simple and direct:
when looking for higher yields on government bonds (investments considered in most cases are almost risk free) investments must be long-term and on equity.
For this reason, investment strategies and decisions must take into account that the best investment for the next 10 years will probably be an investment that will focus on the equity market.