It is often advocated that investing in the long term for equities is the way to go. That is because equities are volatile so in the short term, one may suffer a temporary drop in the price of their holdings. But it has been seen historically that equities has a strong tendency to trend up over the long term thus that is why it is important to invest for the long term to ride out the volatility. However, it does not mean that one should buy at anytime and hold it for a long period of time as this period of time that is required to ride out the volatility can be really long. So how long is really long ? Let me illustrate with one situation below.

Let’s assume that you bought at near the beginning of the purple line as listed on the chart below. The beginning of the purple line coincides with 6th of February 1996 and at that point of time, the STI was at a level of around 2493. Unfortunately, as you can see from the chart, STI went on a decline. It will take you another 1416 days or close to 4 years before you will break even on your investment on the 2nd of January as seen by the end of the purple line. Read more…