15 tips to help you become a successful long-term investor
If you're a long-term investor, you understand how challenging it is to find the right investments that will deliver your expected returns while you hold the stocks. Once you set your investment goals, you need to put a strategy in place to help you achieve those goals.
Now it's important to understand that there are no hard and fast rules to long-term investing. So it's important that you create and follow your own investment plan, choose the right stocks and focus your energy to achieve your desired investing goals.
To help you achieve the best success in your long-term investment, I've found 15 long-term investment tips. Each one of these tips is relevant to your investment journey, because each point carries an important theory that every long-term investor must know.
1.Never chase a hot stock tip – You’ll burn your fingers
When you’re investing on the stock market and rubbing shoulders with other investors, you’ll constantly hear about the next BIG investment opportunity that will make you millions in a short period of time.
Here’s why it’s almost never a good idea to chase a hot tip:
· You can’t afford to waste your money on a bad investment
· These shares might not fit into your investment strategy
· You haven’t vetted the share so you have no confirmation of it potential
· People like to brag about how successful they are – They could be lying to you
So, make sure you double check all the latest “hot” tips yourself to avoid disappointment in your investment journey.
2.Develop an investment strategy and stick to it
To avoid burning your fingers on bad investment choices, you need to have a comprehensive investment strategy that guides your decisions. This should include important elements including but not limited to:
· The type of shares that best meets your long-term investment expectations,
· How long you decide to hold your shares
· When to get out of a poor performing share (Setting a stop Loss)
· What industries you should invest in for the best results
· What’s the best price to buy the stock at and the best time to sell it
3.Diversify your portfolio – Tap into various industries for maximum growth
When you pick your winning shares, look for the best performing companies across a range of industries. This is a great way to protect your investment portfolio from taking too many losses. You see, when shares in one industry start to fall, you still have winning shares in industries that are doing well.
Why portfolio diversification is a good idea:
· You can maximise returns by allocating investments between various financial instruments
· You remain focused on your long-term goals and not panic when some industries struggle
· Access a variety of asset classes like Exchange Traded Funds (ETFs), equities, bonds and property
Remember, when you diversify, you want to consider investments across the board. The more unrelated your investments are the better.
4.Don’t buy too many shares – keep your portfolio manageable
Be careful not to pack your investment portfolio with too many shares. Even though you want to make sure that your portfolio is well balanced across industries and asset classes, too many shares will make it difficult to keep control over your investments. If you’re managing your own portfolio, try to keep around 10 to 15 shares in your portfolio. This way, you’ll be able to cut your losses and maximise your gains easily and effectively.
5.Learn as much as you can about the investment markets Don’t be taken for a ride
One of the most important things you can do for your long-term investment success is to educate yourself on the markets and the companies you’re invested in. If you trust your investment portfolio to a fund manager or financial advisor, you need to have enough knowledge in the markets to tell them what to do with your money.
Why educating yourself is important:
· You’ll be able to spot opportunities more easily
· You’ll know when a bad investment opportunity arises
· You’ll know when your broker or financial advisor is taking advantage of you
· You’ll have more control over your money and financial future
When you put your money into the market, make sure you have an idea of what you’re getting yourself into. Educating yourself is a great way to make sure that you’re not taken advantage of.
6.Find an investment mentor to guide you
You don’t have to invest alone. Most successful investors had a mentor. Even Warren Buffett had Benjamin Graham. The reason you need a mentor when investing is to have someone to guide you on your investment journey. You need someone you can trust to check your strategy, confirm your investment decisions and ultimately help you identify new investment opportunities.
Make sure that this investment mentor has the following characteristics:
· A passion for investing
· Exceptional knowledge of the investment markets
· A strong track record of investment success
· Enough time and energy to help you on your investment journey
7.Be patient – Long-term investing isn’t a race to the finish
When you buy and sell shares for long-term gain, you need to be patient. Buying a share today doesn’t mean that you’re going to see immediate profits the next day. In fact, you might buy a share today and wait weeks or months before it heads into positive territory.
If you buy a share that does really well very quickly, you could be tempted to sell the share. If you act too quickly and take your profits, you could miss out future profits. This rushed sale would see you lose out on thousands. It takes time and effort to become a successful investor, it won’t happen overnight. So be patient.
8.Do fundamental analysis before you buy a share – What’s the company made of?
You need to do your fundamental analyses before you buy any stock. It looks at important parts of the company including how much money the company makes, earnings growth, sales, profit margins, return on investment and a host of other important financial and operational statistics.
When looking at accompanies fundamentals you are able to assess whether it’s a good investment with a strong growth potential or a poor investment with no potential.
9.Include technical analysis before you buy a share
Technical analysis involves looking at a company’s stock price and volume chart. It helps you time your entry into the share and exit the share. You can use technical analyses to confirm what your fundamental is telling you. You can also use it to your advantage when considering investments indices, commodities and futures.
If there investment has a price that can be influenced by supply and demand, you can use technical analyses to gauge its potential success.
To find out more about fundamental and technical analyses, take a look at the book, Fear, Greed and the Stock Market, it shows you everything you need to know about investing.
10.Don’t fall in love with your shares – They certainly don’t love you
The stock market has no emotions. So when you buy and sell shares, you should eliminate all emotions. Every time you decide to invest, you’re entering into a business contract. Keep it that way.
If you fall in love with a share and the share price starts falling you might not want to believe that you’ll lose all your money. So you stay in, waiting for the price to bounce. If this doesn’t happen you can watch your investments tank. Stick to your investment strategy, follow your stop loss and don’t invest with your heart.
- Look for buying opportunities in a down market
When the stock market is in a downturn like it is right now, good companies with solid fundamentals and excellent growth potential become really cheap. Successful long-term investors know how to find these bargain shares and ride the share price up as the market recovers.
The first thing you need to do is look for solid companies with a strong brand and a long track-record of delivering great investment returns. Once you’ve done that, you should look into the sector where the company operates and assess if a recovery for the sector is on the cards.
12.Have your say at shareholder meetings
You also have a small ‘voice’ in the operations of the company you own shares in. You can attend shareholder meetings and vote on various board decisions and other administrative issues as they arise.
But remember, your vote is in proportion to the percent of company stock you own.
The real benefit here is you become an active and interested participant (or spectator) in the company’s business – accelerating your investment learning curve.
13.Invest in dividend paying shares – collect paycheque after paycheque
Dividend paying shares are a great way to add another level of income to your long-term investment returns. This happens when the company that you’re invested in literally pays you for holding shares in the business. You can reinvest these dividends into the company and get paid more the next time it pays dividends.
So how do you find these great dividend paying shares? Well, Joshua Benton just put together The Ultimate “Paycheque” Report. It highlights everything you need to know about dividends and the best shares you must buy now to receive regular paycheques.
14.Find the best brokers that won’t cost you an arm and a leg
One of the most important things you need to invest for long-term success is a reliable broker. Most brokers charge ridiculous fees and require you to pay every time you buy and sell a share. Another expense is the amount of money you need to trade. Some stock brokers want you to pay a minimum of R10,000 to open an account.
If you don’t have that much money to waste, then you might want to consider using Real Wealth’s recommended broker. Not only do they offer the lowest fees in the country, you can also manage your own account and start your long-term investment journey with as little as R100.
To find out who the broker is, check out Real Wealth.
15.Make sure that you’re on track – Check your portfolio as often as possible
When you’re investing for the long-term, it’s easy to set and forget your investment portfolio. But you can’t afford to do this if you have specific plans for your financial future. Once you’ve set your financial targets, you need to make sure that your investments are delivering the returns that you need them too.
So check up on them often and make all the relevant changes to your strategy to keep yourself on track. If you find that your investment isn’t performing the way you expect it to, cut your losses on the poor performing shares and replace them with better earners.
If you’re new to investing and don’t know where to find the best shares for long-term gain, take a look at Real Wealth. This portfolio has delivered exceptional gains to investors. Just look at the performance of the portfolio.
Thank for reading.
Credits:-
http://fspinvest.co.za/articles/investing/15-tips-to-help-you-become-a-successful-long-term-investor-7209.html
@Murat K. Beşiroğlu