"All human power is a compound of time and patience!"
Honore de Balzac (1799 - 1850)
Long term investing or "Buy and Hold" is not about hunches, emotions, stock tips, market timing or making quick profits! It's about using proven long-term strategies to accumulate wealth over time!
A large part of the daily volume on the exchanges is due to traders who hope to make a small profit by taking advantage of small discrepancies in the pricing of securities, or who are able to buy a stock as soon a favorable analysts report is issued and who hope to profit before the inevitable runup.
The instantaneous access to information that financial institutions have gives them an enormous advantage over the individual investor when it comes to short-term trading.
How can an individual compete?
Most people don't have the time necessary to be a trader, watching the market every second, able to react instantly to changes in the market.
Analysts use their computers to chart a stock's price and volume over a period of time, in an effort to find patterns that indicate when to buy and when to sell a stock.
Sometimes, though, it seems that interpretation of these charts is more of an art than a science, and sometimes the patterns are more easily discernible in hindsight rather than in real time.
Diligence is also required to know when the signals are right to sell a holding. Some investors rely on tips or they buy and sell merely on hunches. This is usually one of the fastest ways to lose in the market.
The average investor just doesn't have time to devote hours a day to following the market. Fortunately, they have an alternative. By spending just a few hours a month, investors can build a successful stock portfolio, one that will stand up over the long term and deliver excellent returns.
Over the history of the modern stock market, one trend is clear:
The overall market keeps growing and growing! The setbacks have been relatively minor and short-lived, compared to the tendency of the market to grow year after year.
Statistics have shown that even if you invest at the peak of the market year after year, you would still show a decent return on your investment, much higher than nearly every other kind of asset.
That's why most individual investors should focus on growth for the long-term, and concentrate on fundamental analysis in building a portfolio of stocks.
Fundamental analysis is simply buying hot companies, instead of hot stocks!
Using fundamental analysis, and with a long-term perspective, it's possible for any individual to identify a diversified and balanced portfolio consisting of the stocks of quality companies.
Once selected, these stocks can be held year after year, and any downturn in the market would likely signal a buying opportunity. Maintaining a portfolio like this would only require a few hours a month.
Here are some guidelines for long-term growth stock investors:
- Buy good, strong growth companies with proven track records.
- Don't buy concept stocks, but select quality stocks, and always keep your portfolio diversified.
- Keep on investing regularly and don't try to make a quick profit, slow money is worth just as much!
- Invest with a long-term perspective and reinvest any dividends you receive.
- Don't place your trust on tips.
- Do your homework and find out all the facts you can before you buy a stock!
Above all, invest, don't speculate and ...
Never try to compete with the professionals!