GDP and Per Capita Income have continued to rise, the Indian case. The major part of the country’s consumption is absorbed by large companies which are listed while the SME ( Small and Medium Sector ) does not have the competitive advantage to run with low margins. Therefore while earnings are low, sales volumes continue to rise making companies more valuable.
Long-term investments in stocks, Financial planning and investments, Equity investment
Long-term investing in stock markets is always the smartest things to do to get high returns. For short-term trading, the buying or selling decisions need expertise, you may have to closely follow the markets and also the economy, to cash in the trend.
For long-term investments in stocks, you do not need to be an expert but can bring in huge returns. For example, if you had invested Rs.10,000 on Tata Consultancy Services (TCS) stocks 10 years ago, it would have been Rs. 7,000,000 now (2018). The historical data of TCS shows a whopping 603% surge, despite a slump in the year 2008 due to the global financial crisis.
What are the factors to consider for the best long-term investments?
Here are some quick factors to consider for long-term investing in stocks
Choosing the stock
1. Fundamental analysis
This is a very basic analysis of what you should be doing, before investing in any stock whether for long-term or short-term. The fundamental analysis tells you if a company is financially stable. Check for the overall growth of the industry and the various stocks in the industry.
2. Technical analysis
- Check for the dividends that it has paid over the years for its investors.
- Compare the price-earnings ratio (PE Ratio) with the stocks in the industry. Higher PE ratio indicates overvaluation of shares and is probably have a pullback in the near future.
- Check for the earnings of the company in the past. Rising earnings should indicate the strong earning trend of the company. You should also be checking the liabilities of the company. Historical data can give you the performance of the stock in a long-term.
3. Economic conditions
Stock investments are subject to the economic conditions like inflation, bull, or bear trends in the market.
A diversified portfolio helps to spread your risk. Mix your investments across various categories like equity, debt, mutual funds, etc and also, diversify across various industries. For example: You don’t have to invest only in IT stocks, you might also invest in pharma, banking, etc. So, when one industry is in crisis, your loses get covered with the other performing industries in your portfolio.
Know your risk
The level of risk that you can take depends on your ability to save and your earning potential in the future. If you are young, you can take the higher risk as you have many more years to earn in the future.
Don’t invest and forget
Investing in the stock market should happen regularly. Also, you cannot invest your money and forget it for the next 10 years. You should contribute a portion of your earning every year to get more returns.
Read more – What are the best long-term stocks? What are the historical rises of stocks in the long-term? Long-Term Investing in Stock Markets can never go wrong – WHY?