Long-term investing is a proven and effective way for retail investors to create wealth. Investing experts speak about investing in good stocks and forgetting about them. Although that may have worked for certain investors, it doesn’t mean that you take the long-term investment approach for granted. Here are five things to keep in mind if you are planning to invest for the long term:
Avoiding emotional attachment to stocks
Quite often, retail investors may get emotionally attached to a stock. This would prevent an investor from taking rational decisions when it comes to selling the shares of such a company when it underperforms. Worse, if a retail investor needs funds, then he may end up selling shares of a company that holds tremendous promise to grow rather than selling shares of an underperforming company to which he is emotionally attached.
Practising sector rotation
There could be certain sectors in your portfolio that could underperform during a specific period. For example, there have been phases of underperformance and high performance for companies in sectors such as pharmaceuticals, NBFC, and capital goods. Therefore, you have to keep a close eye on these sectors if you are planning to take comparatively long-term positions in these stocks. If your investment thesis in such sectors does not play out, you may need to replace shares of companies in such sectors with that of companies from other sectors.
Long-term investing requires you to remain patient for your holdings to grow. It also requires you to never be complacent about your holdings and keep monitoring the performance of your portfolio.
* Never be complacent about your holdings. Keep monitoring your portfolio’s performance
* Be sure how you want to define the time span of ‘long term’
* Don’t get emotionally attached to a stock. Take rational decisions