Investing in stocks is often considered a tedious and extremely time-consuming task that prevents many small investors from entering the market. However, it appears to be far from reality to me, as investing in stocks might not be as time-consuming and risky as you might think at first. Before I explain in this short article how new investors can start investing in top stocks in Canada without spending a lot of time, let’s take a quick look at why it’s important for you to differentiate between day trading and long-term investing.
What makes investing in stocks difficult for beginners?
When you as a new investor start thinking of investing in stocks and try to learn the nitty-gritty in this age of internet access and the prevalence of social media, you would most likely come across success stories and interviews of some big traders who explain how they made a fortune from the stock market.
Most such big day traders and short-term investors often claim to spend ridiculous amounts of time tracking real-time market news, analyzing macro factors, and adjusting their stock holdings accordingly. And they’re not lying. Such big traders also tend to spend a lot of money acquiring tools and financial platforms to give them access to real-time news and market data. Or even worse, you may also find stories about how big traders lost millions or billions of dollars trading in stocks.
Given the wealth of information available on the topic, most new investors start considering investing in stocks an extremely risky and tedious task.
Start investing stocks in 20 minutes or less
It’s true that most day traders and short-term investors spend a lot of time tracking day-to-day news and adjusting their portfolios to make a profit. However, new investors need to understand that short-term investing and day trading are entirely different from long-term investing in stocks. When it comes to long-term investing, even new investors can do it rather easily by sparing little time from their busy work schedules. And no, they don’t need to worry about unnecessary day-to-day market noise. Doing so could give a big boost to their hard-earned savings in a few years without much effort.
For example, let’s say five years ago, you chose to invest in an exchange-traded fund (ETF), which simply tracks the movement of all the stocks in the S&P/TSX 60 Index. Doing so wouldn’t require more than a few minutes. A $50,000 investment in such an ETF five years ago would have grown into around $73,850, as the index by now has risen by about 47.7% in the last five years.
Make a fortune investing in stocks
Now, let’s take the example of Shopify (TSX: SHOP)(NYSE:SHOP). Despite seeing a big recovery in the last week, it’s down by about 50% on a year-to-date basis. If you’re a day trader or a short-term investor, its big year-to-date losses could be a nightmare for you. But if you’d invested $50,000 in a Shopify stock for the long term five years ago, your invested money would have grown into more than half-a-million dollars today.
While the recent tech sector-wide meltdown has wiped out billions of dollars from such tech companies’ market caps, long-term investors remain unaffected, as they’re still sitting on large profits. For long-term investors, short-term dips in quality stocks are an opportunity to buy their favourite stocks at a big bargain. That’s one of the key reasons why we at Motley Fool always recommend new investors to focus on buying fundamentally strong stocks and hold them for the long term.
