Timeframe
Know the game you are playing. Market sentiments influence the stock price movement heavily in the short term, whereas the underlying business fundamentals influence the stock price movement over the long run.
Time can be an investor’s best friend because time is what allows the magic of compounding to work. Remember, in the compound interest formula, time is the exponential factor and not the rate of return. Yet, most investors focus only on the rate of return while ignoring the influence that time can have on the overall returns. It is important to define your time horizon before investing in a stock. A longer time horizon allows the company fundamentals to get reflected in the stock price. Over a very long period, even a 10% annual return has the potential to multiply your wealth manyfold.
Below is a nice graphic version of the above information.
Disclaimer: The information provided here is for information purposes only. It should not be taken as investment advice. Please consult your investment advisor before making investment decisions.