5 Things to Remember for a Long-term Investing Strategy
Most successful celebrity investors have followed the long term approach to investing, so here’s how to follow in their footsteps.
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Online stock trading has become quite popular now. The public has accepted this as an investment option. But getting in the way are doubts about the investment strategy to adopt. Following the Path of the Masters Uncertainty is sometimes the only certainty in the stock market. But that doesn’t mean you can’t ride the waves to your investment destination. Though there are also examples suggesting the contrary, all through history we’ve seen so many successful investors who’ve mastered the uncertain nature of the markets to their advantage. Warren Buffett is arguably the most successful of them. Most successful investors have one trait in common – investing with a longterm perspective. Buffett’s success has made him a celebrity and a symbol of long-term value investing. Billionaire value investor Seth Klarman’s famous quote goes like this: “The single greatest edge an investor can have is a long-term orientation.” Following certain principles can make your strategy fully prepared to reap success in the long term. Remember what Buffet said: “Only buy something you’d be perfectly happy to hold if the market shut down for 10 years.” That may be easier said than done, not for Buffett, but for much less experienced investors. But this reflects a basic principle that you need to have at the back of your mind when you make any investment decision. Can Underperforming Stocks Rebound andRising Stocks Grow Further? It can be hard since you don’t know if the underperforming stocks you hold onto would eventually rebound. Investors also sell their other investments, those that have appreciated, so that they lock in their profits. But if those stocks are really good, they could rise further and there is a lot more they could have gained. And the stocks they hold onto in the hope of a rebound could totally zero out. It’s hard to be sure of something for the average investor, particularly if you are new to investing. That’s why certain tips could serve as guidelines to help you be clearer and surer about the decisions you make and the stocks you hold or desire to get hold of. Investopedia’s tips suggest that the most important thing is holding onto stocks that have already multiplied significantly, if you believe there is still some major potential for an upside. That’s the strategy legendary investor Peter Lynch followed, and we all know the success he attained. To have an understanding of whether a stock could give more gains, you need to judge the company on its merits. www.tradezero.co
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Analyzing the Stock on Its Merits Does the price of the stock justify its future potential, or has it reached its peak? That’s also the principle you need to adopt when it’s time to sell a declining stock. There could be some hesitation here, since the natural thought process of an investor who wants to be successful could go like, “what if this stock rebounds?” A stock that is in decline could rebound, but it is never guaranteed. Again, you have to analyze the worth of the stock on its merits. There is no point in holding on to stocks that are consistently performing poorly. You need to limit the losses. Judge Not on the Basis of the P/E Ratio Alone Investopedia also suggests not to be too concerned about the P/E (price-earnings) ratio. The P/E ratio is important, but only when it is used along with the other analyses. A P/E ratio that is low doesn’t necessarily indicate that the stock is undervalued, while a high ratio can’t be solely taken to indicate a company is being overvalued. Research the Company, Learn All about It This also means that you need to invest in companies whose area of business is something you understand, and that operate in a field that has massive potential. They should have the products or services too to capitalize on the opportunity. This is the approach Buffett has been following, which is why he has avoided tech companies. We don’t mean to say you need to avoid them too, but what we suggest is that you do in-depth research about a company before making your decisions. Stick to a Strategy and Keep the Emotions Away When there are so many points of view out there with various investors and analysts suggesting different methods and strategies, it could be hard to select the right philosophy to adopt. But once you’ve chosen an approach, stick on to that philosophy rather than varying between strategies. It is risky to change your approach on the basis of how the market shapes and moves. Remember, Buffett’s value-oriented strategy was something he held on to for almost all of his investing career. He wasn’t too enamored by the late 90s dotcom boom, and that enabled him to steer clear of the trouble when these tech startups started crashing.
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It’s easier to say but harder to practice, but don’t let emotions get in the way of your trading decisions. Don’t succumb to panic or be moved by greed, fear or ego to change your investing strategy. So adopt a long term strategy, do your research and hold on to your approach, and you could be on the path to successful investing.
www.tradezero.co
+1.954.944.3885