Smart investments can make you a lot of cash, bad investments can lose you even more. The bottom line is simple. If you have never invested in stocks and shares, seek the advice of an experienced investment advisor, take her/his advice and educate yourself. The more you know, the more likely you are to make good choices.
What is a Long-Term Investment?
If you are considering investing in stock, shares or bonds and you plan to hold on to them for more than one year, you are making a long-term investment. While fast-track buying and selling seem to be dominating today’s stock markets, experienced stock traders and investors still propagate the benefits of long-term investments.
Choosing the Right Stock
The choice of stock is obviously of utmost importance and requires you to do a bit of homework before you proceed.
There are a few very basic, common-sense principles to apply:
- Buy Stocks from a Reputable Company: Seek out companies with a good track record of sales and growth. Ultimately, by buying shares you are giving that company your money in the hope of getting a good return. Carefully check out the company’s past financial history, current market position and projections for future growth. It’s also worth checking out, what dividends a company paid out to shareholders in previous years.
- Check the Company’s Brand Strength and Competitive Edge: In your research, check out the company’s brand strength and its likely position in the market. It is also imperative to examine the company’s competitors and examine the likelihood of your company’s decline over the coming years.
- Check Out the Management and Shareholder Satisfaction: Make sure you are familiar with the way the company is run, who is in charge and how shareholders are treated. The management ought to run the company efficiently, ethically and disclose all strategies and decisions. Ensure the company issues no unfair preferential shares or warrants. Finally, make sure the company does not hoard cash or misallocate capital.
Long-term Investment Strategies
You are going to need to study the markets regularly to see how your shares are performing. Now you have made your investment, there are a few things you need to keep in mind:
- Sticking With Winners and Letting Losers Go: If your shares have tripled in value, don’t be tempted to sell, they may very well increase in value even further. In contrast, if some of your shares have been performing poorly for quite some time, it’s quite ok to cut your losses and sell to prevent further losses.
- Don’t Fall For Hot Tips: Occasionally, you will hear about some hot investment opportunities and my advice is, don’t fall for it. You are better off sticking with the old reliables that guarantee a strong long-term performance.
- Keep Calm and Detached: If you shares depreciate in value, don’t panic. In most instances, shares recover and gain in the long run. When it comes to making investments, keeping a cool head and remaining emotionally detached is absolutely crucial.
- Less Expensive Stocks are not Necessarily Less Risky: You can buy stocks for $5 or $50 and the temptation is to consider the $5 stock less risky. However, this is not necessarily true as companies with higher stock prices are likely to be more tightly regulated.
- Be Consistent in Your Strategy: Create your strategy, apply it and stick with it rather be lured away by tempting deviations.
- Adopt a Long-term View: Remember, you are making a long-term investment, not out to make a quick buck. Short-term trading is an entirely different ball game and requires a whole different set of skills. Give your company time to make you gains. As long as the fundamentals are right, over time, you will make gains if you hold on in there.
The Benefits of Hiring an Expert
Undoubtedly, hiring someone who possesses ample investment experience is of enormous benefit. While you can achieve a lot by studying the markets, different types of investment opportunities and more beyond, you will never know as much as an experienced professional. Obviously, fees will apply, however, financial advisors know how to make money and the fees may be minimal when gains are taken into consideration.