While the stock market is riddled with uncertainty, certain tried-and-true principles can help investors boost their chances for long-term success.
Some investors lock in profits by selling tapaksuci.id their appreciated investments while holding onto underperforming stocks they hope will rebound. But good stocks can climb further, and poor stocks risk zeroing out completely. Below we discuss 5 tips for successful long-term investing that can help you prevent mistakes and hopefully generate some profits.
1. Ride a Winner
Peter Lynch famously spoke about “tenbaggers”—investments that increased tenfold in value. He attributed his success to a small number of these stocks in his portfolio.
But this required the discipline of hanging onto stocks even after they’ve increased by many multiples if he thought there was still significant upside potential. The takeaway: avoid clinging to arbitrary rules, and consider a stock on its own merits.1
2. Sell a Loser
There is no guarantee that a stock will rebound after a protracted decline, and it’s important to be realistic about the prospect of poorly performing investments. And even though acknowledging losing stocks can psychologically signal failure, there is no shame in recognizing mistakes and selling off investments to stem further loss.
In both scenarios, it’s critical to judge companies on their merits, to determine whether a price justifies future potential.
3. Don’t Sweat the Small Stuff
Rather than panic over an investment’s short-term movements, it’s better to track its big-picture trajectory. Have confidence in an investment’s larger story, and don’t be swayed by short-term volatility.
Don’t overemphasize the few cents difference you might save from using a limit versus market order. Sure, active traders use minute-to-minute fluctuations to lock in gains. But long-term investors succeed based on periods lasting 20 years or more.
4. Don’t Chase a Hot Tip
Regardless of the source, never accept a stock tip as valid. Always do your own analysis of a company before investing your hard-earned money.
Tips do sometimes pan out, depending upon the reliability of the source, but long-term success demands deep-dive research.
5. Pick a Strategy and Stick With It
There are many ways to pick stocks, and it’s important to stick with a single philosophy. Vacillating between different approaches effectively makes you a market timer, which is dangerous territory.
Consider how noted investor Warren Buffett stuck to his value-oriented strategy and steered clear of the dotcom boom of the late ’90s—consequently avoiding major losses when tech startups crashed.
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