Making a Million Using Stocks and Shares ISAs - Part 7 of 26
By Stephen Sutherland, author of Liquid Millionaire.Posted in the Category of ISAS, Investing, Stock Market, Investment Fund on 17th February, 2010.
Tags: investment fund, isa, isa trend investing, liquid millionaire, million, stocks and shares.
Over the last few months, I’ve been writing an ISA Trend Investing Guide that shows you how you could make a million using ISAs.
Over the next few weeks/months, I’ll be giving you an exclusive sneak preview before the main newspapers get their hands on it because I suspect that some time in the future, you’ll be seeing a copy inside your favourite weekend broadsheet.
In last week’s blogs, I shared with you how investment funds can make you “liquid” rich and in my previous blog I explained What do we mean when we say “Beating the Market”?.
I also said I would start sharing with you this week 7 lessons about how the stock market works.
As promised, here they are.
Fundamentals about how the stock market works
First of all, it’s good for you to be aware that some advisers will make out that the market is very complex – however, the way it works is probably simpler than you think.
In this section you are going to learn seven lessons explaining the fundamentals about how the stock market works, and how the stock market is tied to investing using Stocks and Shares ISAs.
Lesson 1: Markets keep going higher
Most Britons have heard of the FTSE 100 but fewer have heard of the S&P 500. The FTSE 100 is an index in the UK that has the top 100 companies trading in it. The S&P 500 is the United States equivalent and, you guessed it, this one has 500 companies trading in it.
What long-term trend has this index formed? Is it up, down or sideways?
Yes, that’s right, it’s in an uptrend.
Can you see the grey vertical shaded areas on the chart?
These grey shaded areas are representing the down periods in the market. They are known as bear markets. And the white areas on this chart are the times when the market rose. These periods are called bull markets.
What do you see happening after each bear or down market?
That’s right. The market goes up. Would you agree that after every bear market, the index always eventually moves into new high ground?
Good.
Lesson 2: The market works in cycles
Did you know that historically, bull markets or up markets have lasted between two and four years?
Bear or down markets tend not to last as long. Bear markets tend to last between nine and eighteen months and therefore are much shorter than bull markets. Because bull markets last longer, the stock market forms an uptrend. It’s like a staircase effect where you have three stairs up and then one stair down.
In Friday’s blog I’ll be continuing to share with you the 7 lessons about how the stock market works with Lesson 3: Three out of every four stocks (and funds) move in the same direction as the market and Lesson 4: The stock market can be timed.
Find Out More
In the mean time if you would like to find out more about how you can make a million pounds through using an ISA, please click here for a FREE sneak preview of my book, Liquid Millionaire.
Happy reading!
Your friend,
Stephen Sutherland
The UK’s Leading Authority in ISA Trend Investing and Author of Liquid Millionaire
Please Note: As always, let me remind you that I am not a financial adviser and therefore not authorised to give advice on what investments to buy or sell.
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