A long-term investment strategy involves holding an investment instrument like stocks, shares, bonds, and mutual funds for more than one year. Although a year can sound like a long time, it can’t be categorized as a long-term investment. Instead, these investments are the ones that go beyond 3, 5,10, or more years. We understand that this period shows that your money will be locked for this long, it is totally worth considering the benefits it provides. Again, why does it needs to be a long-term strategy? Is it a marketing tactic to lock in your money for a longer time? Why should I invest in long-term stocks? These are some questions that still come to the mind of many investors, especially the freshers.
See, investing in stock markets is all about handling the market risk and volatility. Before entering the stock market, you should know that share and stock prices keep rising and falling and it is unpredictable.
When prices fluctuate, most newbie investors begin feeling that their money is in the wrong place and starts exiting the market. However, this is not the right way to make profits from share markets. If you pay close attention, you will find a clear difference between the stock market at present vs the stock market 5 years ago. You will notice that there has never been a downtrend for long-term investments. Therefore, if you want to generate profit from the stock market, you need to stay invested for the long term and see how your money grows wonderfully.
Advantages of Investing in Long-Term Stocks
There are plenty of advantages to investing in long-term stocks. The short-term investment goals might sound very attractive, but the chances of success are less than the average. However, this is not the case with long-term investment. These long-term stocks not only help you maximize your profits but also gives you time to analyze the market and correct the investment mistake you might have made.
Below are some of the advantages offered by long-term stocks in India:
Can invest for long term
The time period may seem like a term rather than an advantage, but it is actually an advantage. The more time you hold your stocks, the more benefits you are able to reap in case of the long-term stocks. Time is money in stock markets. Whether you’re looking to fulfill a financial goal or achieve a life goal, your success will depend on the time period you’ve kept invested in the market. You can get the benefits of compounding as well if you stay invested for the long term. These companies usually have strong financials, clear visibility of long term earnings, solid business growth, and huge cash on the balance sheet to ensure the long-term prospect of the business.
Perks of Compounding
Investors who have just dipped their toes in the stock market might not be familiar with the power of compounding. It is one of the biggest perks of investing in long term stocks. In fact, this is the whole idea behind long-term investments. And if you want to grow your profits exponentially, then start investing early. You will surely be amazed to see the returns after a couple of years.
Helps in Maintaining a Diversified Portfolio
Diversification is an important factor that helps you maximize your profits in the share markets. This is another reason why you should invest in the best long-term stocks in India. Portfolio Diversification is a pretty simple strategy to understand. Let’s say you have a total of 6 eggs in a single basket. Now, what if you drop your basket? You’ll lose all eggs, right? This is the reason why you shouldn’t keep all your eggs in a single basket. The same principle holds true for investments. With long-term investments, you get enough time to build and structure your portfolio in order to diversify it.
The market fluctuations in a short period of time are too much to determine the performance of your stocks. Also, when you plan for a short-term investment, you also increase the level of risk associated with your investment. However, with long-term investment, you don’t have to worry about the market fluctuations, and thus, you can sit back and relax in a low-risk investment scenario.
Best Stocks for 2022 (Long Term): Do You Have them in Your Portfolio
Now that we have discussed the long-term investment strategy along with its benefits, let’s now take a look at the best shares for the long term.
Following are the best stocks in India for long term 2022 on the basis of their market capitalization:
|Stock Name||NSE Code||Industry||Current Price (₹)||Market Cap (Crore)||P/E||ROE|
|TCS||TCS||Computers – Software||3,365||12,31,000||32||49.48|
|Hindustan Unilever||HINDUNILVR||Personal Care – Multinational||2,648||6,22,000||67.90||18.08|
|HDFC||HDFC||Banks – Private Sector||1,430||7,95,000||20.09||15.39|
(Data as on August 5, 2022)
So, these were some of the top shares for the long term.
Now, to help you select the best long-term stocks for investment, here are a few helpful tips to make the right selection.
Tips to Select the Best Long-Term Stocks
Follow the given tips to select the right stocks for your long-term investment:
Do Not Blindly Follow Hot Tips
No matter how credible the source is, never follow a stock marketing tip blindly without conducting thorough research personally. Always select the stocks after doing proper research and analysis on the performance as well as the companies. While some tips can work out to give you huge benefits, the wrong ones can push you down under the risk pretty quickly.
Eliminate Loser Stocks from Portfolio
There is absolutely no guarantee that a stock will rise after a great fall. Know that it is extremely important to be practical about what is possible and what’s impossible in the stock market. So, upon realizing that a stock is performing poorly in your portfolio, accept your mistake and sell it immediately to prevent further losses.
Don’t Exceed Your Investment Budget Abruptly
While it’s true that long-term investments are way better than other forms of investment, you shouldn’t exceed your investment budget in a haste. Instead, decide on a fixed amount and invest it across various good stocks. Rather than investing in only one stock, divide your budget evenly across multiple good-performing stocks and shares.
Donʹt Give More Importance to P/E Ratio
At the time of selecting long-term stocks, most newbie investors overemphasize the P/E ratio, which is not a good idea. Instead, take other factors like Return of Equity, Market Capitalization, Net worth, Past Performance, etc. into consideration while selecting the best stocks.
Choose an Investment Strategy and Stick to it
There are many ways to select stocks but it’s very important to choose a strategy and follow it to make the right selection according to your goals and objectives. Perform a thorough fundamental and technical analysis and make use of stock screeners for making the right decision.
To Sum Up…
As you can see, we have discussed everything you need to know about long-term investment, from the benefits of long-term investment stocks to a list of best stocks to buy today in India for long term. We hope that it helps you in making the most out of your investments.
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