Uncertainty is the nature of the stock market, so producing hard and fast rules for successful and steady long-term growth is a foolish endeavour, but there are certain principles that you can keep on your side that will help to boost your chances of making a success of your investment.
Don’t focus on the day to day volatility
If you’re investing for the long term, you are doing so because you think that there will be a significant return over that period. That means you should focus on the overall trends rather than the day to day volatility in prices or other factors. Some traders take a day to day or minute by minute approach, responding to small pieces of news, and that is a valid strategy for some. But if long-term growth is what you are after, then you should focus on the bigger picture of how your investment performs over a period of weeks or months, not day to day.
Holding on to successful stocks
Some of the most successful investors have made their money through identifying under-valued stocks and then holding onto them for long periods. In some cases, the temptation to sell would have been strong, but those investors believed that there was still room for further growth in the price and they were right. The key, if you are to profit from identifying undervalued stocks, is to hold onto them until they have reached the level that you think they can, rather than selling because they have hit some arbitrary level of profit. Judging each stock on its own merits is the way to go.
Cutting the losers loose
The flip side of being patient with performing stocks is to be prepared to be impatient with underperforming ones. Many investors cling on to stocks that are struggling in the hope that they will eventually rebound. Selling a stock in those circumstances can seem like a failure and even counter-intuitive if you see yourself as a long-term investor, but it is important to be objective and realistic. If your stock isn’t performing as you expected and there is no obvious reason to expect improvement, then be prepared to sell, to take a loss and move on.
Treat all investments the same
When you are investing for long-term growth, it is important to take a consistent approach to the way that you invest. Whether you are checking out a BTC profit website or evaluating an investment fund portfolio, your aim is to make money over the long term, so you should treat all investments the same. For example, some investors can be more cavalier with lower-priced stocks, on the grounds that there is less to lose, but it is a good principle to treat all of your investments in the same way, focusing on percentage profit on your investment, rather than the total amount of money invested.
Decide on your strategy and don’t be swayed
There is no one single way to produce long-term investment growth, but if your focus is on the long term, one crucial factor is to ensure that you don’t change strategies in the short term. Changing your approach or ditching one strategy for another means you risk ending up with a confused overall investment portfolio andthat leads you to be more of a short-term investor. Take inspiration from Warren Buffett, who famously stuck to his strategy throughout the boom in online investment in the late 1990s, and as a result, he avoided the losses associated with tech start-up failures.
Future potential informed bypast performance
If you are to profit from your investments in the long term, then being over-reliant on what has happened in the past can hinder your profitability. Of course, past data is useful and can be a handy guide, but the art of investment is in predicting how an investment will develop, based on potential, not on how it has performed in the past. Future potential, informed by past performance should be your focus when you aim for long-term growth.
Finally, it is important to be objective and to keep an open mind when assessing a potential investment. Look at the details of the investment, assess the facts and use your judgement, but don’t be swayed by reputations, hype or rumour. Develop your strategy, focus on the key factors you are trying to identify and don’t be blown off course. By taking an objective long-term view, you will be giving yourself the best chance of generating steady growth over months and years.