The financial market is on everyone’s mind, especially after the 800-point drop in the Dow last week. It was recorded as one of the worst days in the U.S. stock market this year. When troubling times hit the economy, investors tend to scramble for security.
Building a Strong Portfolio
The ideal solution for many investors is for high returns with no or minimal risk. However, only the inverse is true. A good way to deal with market risks is to hedge your investments. Long term investments are a great way to limit the volatility of the stock market and the risks involved in investing. You can build a portfolio with a mix of high risk and low return investments for a stable journey. A robust portfolio of long-term investments makes it possible to provide income for later in life, and for the rest of your life.
Long-term investing involves assuming a certain level of risk in the pursuit of higher rewards. This comprises investing in equity-type investments, like stocks and real estate. Long-term investing is primarily about wealth creation.
As per Nancy Tengler, “Retirement is 20 years of unemployment. Stocks provide a hedge against inflation even when the inevitable bear market arrives. With the real 10-year Treasury yield at 0.20%, bonds could be riskier than stocks over the next 20 years.” 1
What to Expect with Long Term Investments
Consistent Market Success – Many of us are pursuing consistent market success and one of the ways of achieving it is by expanding the time horizon. Looking for the hits of the week and investing in them can give you profits for the immediate time frame; however, an unanticipated turn of events can derail your position. Thus, picking ideas from the best long-term stocks can improve your odds significantly.
Capital appreciation – The bulk of your long term investment is generally consisting of equity investment because of their potential for capital appreciation. Capital appreciation tends to produce double-digit returns, which will consequentially lead to growing the value of your portfolio for likely many times over in the future.
Key Principles of Long Term Investing
Ride Out the Ups and Downs – A common point of contention for many investors is that their investments can fall in value at any given time. Since they are primarily equity investments, there is no guarantee of principal.
But then again, since you are holding them for the long term, the stocks will have a chance to recover with time.
Maximize Investment Returns – Most experts will recommend holding stocks for longer, to get 100%, 200% or more rather than a 50% gain in five years.
Spread Out Your Investments – There is a wide variety of asset classes with different levels of risk that you can invest in. However, it is difficult to know for sure which will perform the best, or avoid dips so the best strategy is to typically spread out your investments.
Top Four Stocks to Buy For the Long Haul
- Wayfair (NYSE: W)
Consumer behavior towards e-commerce outlet is a sure-fire trend you can bank on. Hence, Wayfair (W) is a good option. Wayfair is an online retailer of home goods like furniture and decorative products. W has been performing and generating nearly 45% direct-retail sales growth last year which has led to a rapid rise in W stock. The investors have seen their stock price double since 2017.
- FedEx (NYSE: FDX)
FedEx is viewed as a strong contender for top long term stocks. However, with Trumps’ foreign policy a key consequence is the on-going tariff wars with China. Since China is an exporting power, international couriers like FedEx have taken a beating.
Although FedEx delivered great results for the fourth-quarter fiscal 2018, investors panicked on FDX stock due to shipment-slowdown fears. Nevertheless, this is where a long term investment will help reap the benefits of long term investing because of benefits from the e-commerce trend.
- Welltower (NYSE: WELL)
Welltower is a real estate investment trust in the segment of senior housing and assisted-living facilities. They also handle memory-care communities, post-acute care facilities and medical-office properties.
Currently, Baby Boomers represent the largest living generation in the U.S. and a significant number of this demographic are already at retirement age. Soon they will require these types of services which could boost the outlook for WELL stock. This segment is often considered a good investment for a long-term strategy.
- Rosetta Stone (NYSE: RST)
Rosetta Stone is a maker of language-education software. RST has already proved its position in the markets, with a 50% jump, so far in 2019. However, it will still require some patience moving ahead.
With Google Translate, Rosetta Stone had some poor sales and earnings performances. However, learning languages is much more than mere translation. Banking on the message that computers can’t yet duplicate learning foreign languages, RST has the chance to consistently surprise investors.
Yet another popular stock for long term investment as per Jim Carter,
“Murphy USA Inc. (NYSE: MUSA) has been recommended as a long term growth stock according to analysts at Beta Research. With their stock price currently trading around $92.08, the firm has proven a solid track record of growth over the past few years. Investors might consider the stock as a long term growth candidate as the firm has yielded 14.50% earnings per share growth over the past 5 years and -4.20% revenue growth over that same time frame.” 2
Start your journey of long-term investment with stocks. They are paper investments that are easier to manage when compared to a property or a business. In a lot of ways, investing in stocks is similar to investing in the economy because these stocks represent ownership in profit-generating companies.
Not interested in long-term investment with stocks? Check out our recent post on the booming cannabis industry here.