Strategies of Long Term Investments

A long term investment is one which is made for a minimum period of 10 years. As we know, one thing constant in the world of the financial market is change. And, it is obvious that a long span of time will be vulnerable to many changes. Hence, it is essential to plan long term investments carefully.

Strategies of Long Term Investments

  1. Be aware of the right time to buy and sell stock:

We all know that the right time to sell a stock is. Usually, when an investment appreciates, it should be sold. But, when is the right time to sell stocks that are falling in value. Many a time it so happens, that we hold onto stocks declining in value expecting it to appreciate. It may happen that it sinks so low, that it becomes completely worthless.

You will need to research the future prospects of the companies whose stocks you hold. Then do a cost benefit analysis. After this decide your future course of action i.e. whether to sell or not to sell.

  1. Do your own research

When you are investing your hard earned money in stocks, it is best not to rely on others. You need to analyze the current and expected trends of the company. Choose your investment options based on this.

  1. Understand the difference between long term and short term investments

Long term investments are totally different from short term. When you are looking at a long time horizon for your investments, be prepared to forgo short term benefits. There are frequent fluctuations in the financial market. There will be traders around you who will be gaining from them. But you have to be clear about your long term goals and not be hassled by these changes.

  1. Don’t base your buy/sell decisions on P/E ratio

Most of us are under the impression that a low P/E ratio indicates that the stock is a low value and a high P/E ratio indicates a high value. But this assumption is not true. The P/E ratio is definitely relevant but it must be analyzed with other pertinent data before coming to any kind of conclusion.

  1. Develop your own investment strategy

There is no single unique investment strategy. There are different types of investment strategies available to choose from. It is recommended that you analyze different strategies and select the one that is best aligned to your thought process. Once you have selected your strategy, avoid switching strategies.  Stick to your own unique strategy.

  1. Base your investment decision on the future prospects rather than the past

A company may have performed well in the past. But the returns on your long term investment will be determined by the future and not the past. You might be tempted to invest in blue chip companies. But, you can explore the option of investing in smaller companies which have the potential of turning blue chip.

  1. Tax implications should not be your primary concern

Many of us prioritize taxes while deciding on our investment options. There is a need to minimize taxes, but this should be a secondary concern. Our primary goal while investing should be to grow and secure our money.

Although not exhaustive, these are some pointers for long term investment. These can be followed to minimize the investment risks. However, it is recommended to seek the advice of a professional financial consultant for long term investments. Greg Silberman is a leading financial consultant in Georgia, Atlanta who advises a wide variety of clients regarding investments.