Thinking long term doesn’t help achieve one’s goal

It is logical only when you are investing surplus cash without a specific goal

Like many, you may believe that equity investments should be held for the long term. But do you truly invest in equity for the long term? Or do you think long term when your investments perform badly? If you invest for the long term, why do you take profits when you earn sizeable gains in the short term? Also, why do you continually follow the market if your objective is to hold for the long term? In this article, we discuss the behavioural aspects that drive us to think long term. We like gains. But the fact is we hate losses more than we like gains. That is, a loss of 10,000 gives us more pain than a gain of 10,000 can give us happiness. It is, therefore, natural that we want to avoid losses. That is possible only if you invest in stable-income products such as fixed deposits. The issue is that post-tax returns on deposits are low. You must, therefore, save more if you want to achieve your goal with bank deposits. And that may not be possible, given that you must maintain your desired standard of living and save some to achieve your life goals. So, investing in assets that generate higher expected returns such as equity becomes a necessity.