Investors who follow the stockmarket on a daily basis run the risk of missing the forest for the trees (as the saying goes). What this statement means is that if you concentrate on every news event and every price movement (every tree) you run the risk of missing the big picture (the forest)!
It's certainly much easier said than done. Human nature seems programed to react to the constant stream of financial data; it's this instinct which is a major factor in many investors over-trading and selling stocks at the first sign of trouble. This is why some commentators argue that most humans simply aren't 'made' to invest, it's not without merit but the beauty is you can teach yourself to invest better.
For investors who can shut out this 'noise' and concentrate on the big picture, long-term gains come much more easily.
If you take a look at a long-term chart of the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) you'll see that it starts at a low point on the left hand side and moves to a higher point on the right hand side – in other words, the market rises. It's not that surprising really when you consider the stockmarket is a proxy for the economy and in the long-term an economy tends to expand and grow larger.
So it's not actually a question of if but rather when the index hits 6,000 points. I don't know the answer, however what I do know is that timing the market is tricky. Take a look at the chart for Flight Centre Travel Group Ltd (ASX: FLT) – the share price has fluctuated up and down over the past 15 years, but over the same period the share price has gained around 650%. At the end of the day, it hasn't really mattered what the share price did in the intervening period – the long-term result is spectacular and investors who think about the big picture and approach the market with a buy-and-hold mentality have enjoyed those gains!
