Ask Yourself This Before Starting Long Term Investment
HDFC, Tester
Do you intend to enjoy a seamless experience with regards to your long-term stock investments? Of course, you do. Apart from following a checklist for equity investments, you also need to ask some tough questions to yourself to ensure you have the right mindset to hold the stock for a long period of time. Only when you have the right answers to all these questions, will your mind be tuned to hold the desired high-quality stocks long enough and earn big profits.
Let us have a quick glance at some of these top questions related to long-term stock investments.
Will You Require the Funds You Have Kept Aside?
The secret behind substantial profits is to keep away from the temptations to sell off quality stocks for meager profits. For this, you need to ensure that you invest only that much amount which you won’t require in the short to medium term. Let’s consider this example. You are getting married in a few months and are looking to invest your savings to earn some quick profits. Our advice: don’t do that. You can never predict a stock’s behavior accurately in the short term. Even a great stock needs time to outperform. Once you invest any amount in equities, expect it to be locked in for a minimum 10-12 years. Don’t think of selling a promising stock for any short-term funds requirement. So, deciding the amount you want to invest is the key here!
Does Your Portfolio Include Dividend Paying Stocks?
There are many companies listed in the stock markets that have been delivering consistently good results for years. This allows them to pay dividends, and sometimes even bonus, to the shareholders. Look out for such information about quality stocks on websites like ours and you will be able to study and shortlist few such stocks. Just make sure that you have few of such stocks in your equity portfolio. The reason is fairly simple. By holding such dividend-paying company stocks for a decade or more, you would manage to earn a significant amount of money through dividends in addition to the profits you would get with the rise in stock price.
Stock markets are very addictive. If you are a long-term investor, it sometimes helps not to follow the markets on regular basis. This will keep you away from the temptation to buy more than what you can manage or sell off any stocks that are profitable. Instead, periodic breaks away from the stock markets will help you to develop the right investor mindset – which is to stick to your winners for as long as you can and allow them to perform over time!
Do You Follow Business Industry Related News and Trends?
If you hold multiple stocks from multiple companies, it is absolutely necessary that you are updated with the latest industry news and trends. This will allow you to get important information about quarterly and annual results, dividends, stock splits, bonus, etc. announced by the companies of the stocks that you are holding.
Do You Already Own Several Stocks from the Same Sector?
Do study your portfolio from time to time and ensure that you are not concentrating your investments in just one particular sector. If and when you identify such a situation, try to keep only the best ones from that sector and sell off the others. This will allow you to buy the best stocks from other trending industries/sectors, thereby enabling you to diversify your portfolio.
Keep asking the above set of questions to yourself from time to time for a smooth ride in the stock markets. The right set of questions will fine-tune your investing behavior and prepare you for the long term. Think Profits, Think Long Term!
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