While penning down our thoughts on the story, we could not think of a better quote to start with –
The single greatest edge an investor can have is a long-term orientation.
– Seth Klarman
This explains a lot. You want to create a wealth, focus on long-term investments.
But what are they? Well, there is no clear definition for this. When you are considering investments for the time frame for at least 5 years, it is called long-term investments. Long-term investing places emphasis on buying fundamentally strong companies which have a potential of maximising your returns.
Unlike trading, long-term investing doesn’t bank on the clamour in the investing jungle, is not affected by the titbits given for free by your friends or uncle and lastly, gives microscopic importance to short term volatility in the stocks.
How to be a successful long-term investor?
- Confused on how to get started? Go the ‘Warren Way.’ Our favourite investor guru never fails to awe us with his investing tips. Here is a popular adage by him, ‘If you are not willing to own a stock for 10 years, do not think about owning it for 10 minutes.’ To make a long story short, research well to determine the company’s longevity. When you invest in a company, you are doing more than parting with your hard-earned money. You become a partial owner of that company.
- Paying heed to the short-term volatility? We say a ‘Big No’. Long-term investors abstain themselves from whimsical buying and selling. Volatility is the only constant element of the market. Based on such fluctuations, your friends, family, manager or neighbour may advice you to buy/sell a stock. So, if you want our tip, here is our two cents on it…Stop chasing those tips.
- Scouting for a strategy? Retain Stars and Liquidate the Dogs. Many investors attach sentimental value to the stocks purchased. This eventually results in investors holding onto the non-performing stocks in a hope that their value will increase again. But it is advised to take a rational call and sell such stocks as they may never increase in value again. Also, many investors succumb to the enticement resulting from the appreciation of the well-performing stock. This is not advisable as they may further appreciate and you will not be able to enjoy the optimum gains on your investments.
- Judging stocks purely on basis of Price Earnings Ratio? Well, what about looking at the bigger picture? Just because the P/E is higher than the industry average, it doesn’t necessarily mean that the company is overvalued and vice-versa. It should be looked in conjunction with other valuation metrics such as Price to book ratio, Price to sales, PEG ratio.
- Less risk and high returns with penny stocks? We suggest you think twice. We don’t deny the temptation to invest in penny stocks to maximise your returns. Few investors hold the belief that penny stocks restrict the loses because they are of smaller denomination. However, these stocks are riskier and you can end up sinking every penny you invested. The information about such stocks are restricted and they are not highly regulated. You still want to take a plunge, go ahead…but then don’t complain.
- And lastly, we hope you follow a disciplinary action towards your investments.
Yes, we are talking about the old dictum advised by your financial planners, investment gurus and maybe even parents. So here it goes again… Invest regularly, monitor your investments on a periodic basis (or hire a professional to conduct this task), stick to your investing approach, don’t lose track of your long-term goal and have an open mind.
How R&R can help you?
- Take the first step towards wealth creation. Each investor has a unique financial objective and risk appetite. Assessing your financial goals will be a good way to kickstart your voyage towards wealth creation.
- Join the R&R family. And all it will take is a ‘click’. You can visit our page https://www.researchandranking.com/subscribe/ and subscribe to the plan most relevant to you.
- Invest with us. Why? Because we are the name you can trust to create a robust portfolio.
We have dedicated professionals who identify the companies with strong competitive advantage and fundamentals.
- Bury all your worries. We don’t just advice and forget! We continuously monitor the recommended stocks on your behalf and advice portfolio rebalancing, wherever necessary.
- And lastly, don’t worry about the returns. We aim to deliver 4x – 5x returns in 4 – 5 years.
It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for. – Robert Kiyosaki