It is true that if the country’s capital is growing, the stock market will rise. Although corrections may sometimes take more than a decade, as seen in the case of the Nikkei index, there will eventually be a rise. If we examine the history of the Dow Jones from 1896 to 2016, an uptrend is evident.
The greatest market crash occurred in 1929 when the Dow Jones Industrial Average began its decline, reaching its lowest point of 41.22 points in 1932. This marked the beginning of the Great Depression. According to Federal Reserve History, the Great Depression lasted until 1941, coinciding with the Second World War.
It is worth noting that panic selling gripped the New York Stock Exchange on October 24, 1929, also known as Black Thursday. A record 12.9 million shares were traded as investors rushed to sell their stocks, resulting in a significant price decline. Although the market experienced a brief recovery the following day, the downward trend soon resumed.
The Dow Jones had spent a grueling 19 years climbing to new heights, only to see all of its progress vanish in the aftermath of the 1929 crash. It took 25 years for the stock market to recover and reach new highs fully. The important thing to understand is that despite market crashes and new lows, stocks will always rebound. The key here is patience. Those who are patient will undoubtedly see their portfolios grow.
The gap in stock market recovery will shorten as the population grows. With a larger population, we can expect an increase in capital and more investments, resulting in stocks rising in a shorter time frame.
Another significant market downturn in history was the stock market crash of India in 1992, also known as the Harshad Mehta scam. Mehta manipulated the market with fake bank receipts, causing the Indian stock index to plummet below 5000. It fell from 4500 to 2500, resulting in a loss of 1000 billion INR. No one could have anticipated the staggering rise to an index of 60000 in 2023. The market always goes up. Money is inflationary, and the number of stocks is limited. Although it may not appear that a major surge is imminent, it will eventually come around.
Despite everything, now is not the time to dwell on past pain. The answer lies right in front of you: hold your position. There is never a ‘get rich quick’ scheme. The regret of selling your stocks always outweighs the fear of missing out at the top. Ultimately, it’s about how you manage your anxiety and handle panic situations.
History repeats itself, and it has consistently shown different outcomes in the bull market. The market always breaks higher highs.
What are the benefits of holding stocks long-term?
The answer is I have never seen anyone who has incurred losses by holding their stocks for over 20 years. In India, there was a man whose father purchased 20000 MRF shares at around Rs 5. Twenty years later, the man sought advice from an expert on selling his 20,000 units of MRF stocks. At that time, the price of MRF shares was Rs 65,000, and today it stands at Rs 98,000. The benefits of holding your stocks long-term are evident: it can lead to wealth accumulation.
Moreover, holding stocks long-term offers additional advantages. You can enjoy dividend income without paying taxes since you haven’t liquidated your assets. It can lead to financial freedom, relieving you of worries about building wealth. Furthermore, by holding stocks long term, you can avoid the need to time the market for gains, steering clear of the pitfalls of market timing and benefiting from the overall upward trajectory of the market.