subject: Investing For The Long-term - 2 Strategies You Should Consider [print this page] Long-term investing is not something that appeals to a lot of people simply because it requires a great deal of patience. A lot of people are more interested in forex or options trading, for instance, where you can make decent short-term returns. However it's still a great way to create long-term wealth.
There are two investing strategies that are arguably the best ways of achieving this goal. The first one is to simply wait until the markets have fallen heavily and are massively oversold. Once this happens, many stocks fall in accordance with the wider market and suddenly become very cheap based on fundamentals.
For instance in the last decade we have seen the markets crash after the events of September 11, the Iraq war and the more recent banking crisis. As a result of this many stocks hit record lows. In fact it quickly became clear that many stocks went far too far to the downside based on future earnings forecasts, so there were many bargains to be had.
The only problem with this strategy is that you may be waiting for years until the next stock market crash. Therefore another strategy you can use is to adopt a Warren Buffet mindset and only invest in large market leading companies that have proven themselves to deliver growth in both dividends and earnings year after year.
With this approach you only want to target the biggest and best companies such as Coca Cola in the US and Tesco in the UK. In other words companies that are highly likely to continue to boost their earnings and dividends, and stay at the forefront of their respective industries.
The great thing about this strategy is that you don't have to worry about your entry points so much, as the yearly growth should push the share price above your entry price as the years go on. However you will generally make a lot more money if you purchase shares in these companies when they have fallen to a temporary low for whatever reason. Plus you can also boost your returns even further by reinvesting any dividends that you may receive each year.
The point I want to make is that despite the volatility of the stock markets in the last decade or so, you can still make money by investing with a long-term view. You can either wait for the next stock market crash and try and pick up some bargains, or you can invest in the highest performing companies that have proven growth records. Either strategy can deliver huge profits in the long run.
by: James Woolley
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