12 Tips for Successful Long Term Investment: Although it has its share of uncertainty, investing in financial assets can prove to be quite profitable. As long as you play your cards right. The stock market has shown itself to be a great place for long-term investments. There are several general rules and ideas that will help you set yourself up for success. However, hope is not one of them.
Page Contents
Image source: Pixabay
One has to do more than just put some cash down and wait for it to grow over time. Follow these tried and true strategies to earn significant gains over time.
12 Tips for Successful Long Term Investment
Make a habit of it. Investing occasionally, only when you have some extra cash, won’t take you far.
For example, try to start by saving P1,000 each month. That will allow you to invest P,5000 every five months. You should try to invest at least twice a year. At first, it won’t seem as your grain as increasing much. But, once you are able to see the bigger picture, you’ll be surprised.
Many veteran investors will advise you to diversify your investments. It’s a timeless and universal adage that applies to anything, but especially to stock. Be sure to buy stocks from different industries or regions, as well as different companies.
You might think that a particular company has a great idea and decide to go all in. Many have been down that road and regretted it. See what the investors that bought pets.com during the tech bust of 2000 have to say about that. Even though stocks should be your primary aim, try to invest in bonds, UITFs, mutual funds, and others as well.
Unless you have some extra times on your hands, this is something you should avoid. Instead, just invest regularly and be patient with the market’s volatility. Set up a systematic investment plan. Such a plan could be a system in which cash is automatically withdrawn from your account and invested at a discount brokerage firm.
If you can set aside some extra hours to study the charts, you can get more involved in investing. When you are ready, you can add a new dimension to it. For example, you can employ an option strategy suitable for long-term investments.
Some types of investments carry more risk than others. Knowing your tolerance for risk will help you avoid big mistakes. Gauge how much downs you can tolerate without selling. This is crucial, as one of the most common mistakes is selling when the prices are low.
Keep in mind, you’re in this for the long run. Patience is key to good investor behavior. A long-term investor has the advantage of being able to ride through the market’s ups and downs.
That being said, there’s no guarantee that a stock will bounce back after an extended fall. There’s no shame in selling off investments to prevent further loss, so try to be realistic about the outcomes of poorly performing investments.
Peter Lynch famously spoke about ventures that increased ten times in value, dubbed as “ten baggers”. Talking about his success, he gave credit to a handful of such stocks in his portfolio.
If you want to achieve that as well, you have to have the discipline of hanging onto a stock even after its value has increased manyfold. So, what’s the takeaway here? Consider a stock on its own merits—avoid arbitrary rules.
Peter Lynch is not the only veteran that has great tips to give. Many a great investor is happy to share a word of advice. If you want to follow in their steps, make sure to read a book or two that will help you start.
Another common mistake is believing that there is less to lose with cheap stocks. A penny stock can plunge down to zero, just as a $60 stock can.
If that happens, you’ve lost your entire investment. At which point, it doesn’t matter what was the initial price of a single stock.
Even though both stocks carry a similar downside risk, they are still not the same. Because they are usually better regulated, higher-priced stocks come with less risk. 12 Tips for Successful Long Term Investment.
Brokers make a living off of transaction fees, among other things. Each time you buy or sell, the broker charges you a fee. But that’s not all, there are other fees as well.
And there are the taxes. Don’t be intimidated by them, but do consider them. It’s especially important to be aware of the fees when you are moving towards diversifying pooled funds.
Such costs probably seem insignificant at first, but they could potentially eat up a good portion of your earning in the long-run. That especially goes for annual management fees.
Knowing how to invest is just as important as knowing what to invest in. Buying the right companies is not enough. You’ll need to have a philosophy that you’ll stick to.
Wavering between different options is dangerous territory, especially for inexperienced investors. Let’s take the legendary Warren Buffet as an example.
She steered clear of the dotcom boom, sticking to his value-oriented strategy. The move saved him major losses when the tech startup crashes ensued.
Many investors don’t know when it’s time to call it quits. If you are not “the sky is the limit’ type, set a specific financial goal. Once your gains have surpassed it, it’s time to sell.
Let’s say you are looking to purchase a condo worth P5 million. When your portfolio gets there, you can call it a night.
Not having a set financial goal can be stressful. If you don’t have one, you’ll always be asking yourself whether or not it’s a good time to sell. The decision will be easy when you have a specific value in mind.
The longer you are in the game, the risk becomes more manageable. Remember, you are giving businesses time to develop. Be patient and consistent. Exercising those virtues will help you afford your dreams. Finally, we believe this tiny information will give you an overall idea about, “12 Tips for Successful Long Term Investment“.
12 Tips for Successful Long Term Investment