The long term investor needs to follow a strategy that is compatible with long term investment success.
A long term investor requires that the investment is safe, that his capital is secure and that there is a reasonable risk free return on the investment. Banks offer a reasonably risk free investment however the interest rate is very low. The Stock market has much higher returns but there is an aspect of risk which deters some investors. For all this the stock market can proffer the long term investor the opportunity to invest with manageable risk and a good return.
Six Tips for Long Term Investment:
A key long term strategy for a long term investor is to diversify their investments into various instruments such as stocks, bonds, and mutual funds. Most investment advisors recommend that not more than 10% of an investment portfolio should have more than one stock or other similar investment. Investments should be spread over geographical areas of the world such as Asia, America, Europe and also emerging markets. In addition several market or industrial sectors should be used so as to avoid the risk of a sector collapsing and a huge lose of capital.
Investors tend to be lone wolves and don’t take advice easily however even though you might not take the advice at least listen to it some of it might make sense. Try and invest in the companies whose products you like. Try to analyze the companies you are interested in and see if you like their business strategies. There are many resources on the internet that can help you understand investments. Also although an investments past performance is no guarantee that in the future it will perform well it can be prudent to choose investments that have been strong performers over the last couple of years.
Another tip is to keep an eye on your investments. Don’t invest and then forget about them. Even if you are investing for the long term you need to make sure that you have investments that are performing as you had expected against the market indices. Don’t be tempted to sell investments that are doing well to take your profit; you are in it for the long term so investments that are doing well should continue to grow. On the other hand investments that are not doing well should be sold and replaced. Remember that it is better to lose a little rather than wait in the hope that the investment will do better when in fact it continues to do badly and you lose more money.
Don’t be tempted to cash in your dividends as the return on an investment is a combination of reinvested dividends and stock appreciation. The yields might seem small but over a period of years they can make a big difference. Part of the analysis of your potential investments is looking at stocks that have a history of regular dividends.
One of the golden rules of investing is that when the market is down then that is the best time to buy stocks and when the stock index market is high its time to sell the stocks that are not performing so well and reinvest the proceeds in other instruments such as bonds or real estate.
Finally as you are investing for the long term it is important that you don’t reduce your funds through unnecessary fees and commissions. Keep your trading down to a minimum so as not to incur fees that reduce your funds. When the markets turn down don’t make the mistake of panic selling. The economy goes in cycles so a market that is down will soon move up again. Always bear in mind that a market that is low presents a buying opportunity.
A long term investor requires that the investment is safe, that his capital is secure and that there is a reasonable risk free return on the investment. Banks offer a reasonably risk free investment however the interest rate is very low. The Stock market has much higher returns but there is an aspect of risk which deters some investors. For all this the stock market can proffer the long term investor the opportunity to invest with manageable risk and a good return.
Six Tips for Long Term Investment:
A key long term strategy for a long term investor is to diversify their investments into various instruments such as stocks, bonds, and mutual funds. Most investment advisors recommend that not more than 10% of an investment portfolio should have more than one stock or other similar investment. Investments should be spread over geographical areas of the world such as Asia, America, Europe and also emerging markets. In addition several market or industrial sectors should be used so as to avoid the risk of a sector collapsing and a huge lose of capital.
Investors tend to be lone wolves and don’t take advice easily however even though you might not take the advice at least listen to it some of it might make sense. Try and invest in the companies whose products you like. Try to analyze the companies you are interested in and see if you like their business strategies. There are many resources on the internet that can help you understand investments. Also although an investments past performance is no guarantee that in the future it will perform well it can be prudent to choose investments that have been strong performers over the last couple of years.
Another tip is to keep an eye on your investments. Don’t invest and then forget about them. Even if you are investing for the long term you need to make sure that you have investments that are performing as you had expected against the market indices. Don’t be tempted to sell investments that are doing well to take your profit; you are in it for the long term so investments that are doing well should continue to grow. On the other hand investments that are not doing well should be sold and replaced. Remember that it is better to lose a little rather than wait in the hope that the investment will do better when in fact it continues to do badly and you lose more money.
Don’t be tempted to cash in your dividends as the return on an investment is a combination of reinvested dividends and stock appreciation. The yields might seem small but over a period of years they can make a big difference. Part of the analysis of your potential investments is looking at stocks that have a history of regular dividends.
One of the golden rules of investing is that when the market is down then that is the best time to buy stocks and when the stock index market is high its time to sell the stocks that are not performing so well and reinvest the proceeds in other instruments such as bonds or real estate.
Finally as you are investing for the long term it is important that you don’t reduce your funds through unnecessary fees and commissions. Keep your trading down to a minimum so as not to incur fees that reduce your funds. When the markets turn down don’t make the mistake of panic selling. The economy goes in cycles so a market that is down will soon move up again. Always bear in mind that a market that is low presents a buying opportunity.
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