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Ten (10) tips for successful long-term investing in the stock market

By November 10, 2017 No Comments

The stock market is a great place to invest. And it is greatly profitable if you know what you are doing. Unfortunately, a lot of people put money in the stock market hoping that it will make money for them. But hope is not an investment strategy. And you’ll most likely lose money instead, if you do that.
Below are 10 things to remember for successful long-term investing in the stock market. Follow them and watch your investment gains grow significantly through the years

1. Invest regularly.

Investing should be a habit. It should not be something you do only when you have extra cash. You can invest every 5 months, or at least twice a year. It may not seem much at first, but you’ll be amazed at how much your money will grow over the years by simply doing this.

2. Avoid timing the market.

Timing the market is for stock market traders. Or more accurately, it is for those who have the time to monitor charts and analyze a company’s fundamentals. If you’re usually busy with other things, such as work, then trading is not for you. Instead, just invest regularly, and enjoy the ride through the ups and downs of the market. Personally, I’d rather focus on building and managing my businesses, than spending hours looking at stock charts. The former is also profitable, but more self-fulfilling for me

3. Set financial goals.

A large chunk of investors struggle to decide when to sell their stocks. It’s advisable to sell when your stocks value is enough for you to afford a specific financial goal.
For example, if you’re planning to buy a mansion along the eastern bypass valued at 20million, you should sell your shares and buy that property when your portfolio surpasses that value. If you don’t have a financial goal, you’ll always be asking yourself if it’s a good time to sell. But if you have a specific value in mind, the decision as of when to sell will be easy.

4. Buy the right companies.

There are more than 60 public companies listed in the Nairobi securities exchange. And not all of them are a good buy for long-term investing. It therefore makes sense to invest in companies that are consistently profitable as a business in the long run. Moreover, they should also have good growth potential for the future. It’s important to pick the right stocks if you want to maximize your investment earnings.

5. Follow a strategy.

It’s not enough to buy the right companies, you should also have an investing strategy as well. And one of the best long-term investing strategies that successful investors do is cost averaging. Cost averaging is an investment strategy which requires systematically purchasing securities at predetermined intervals and set limits over a long period of time.

6. Invest more when the market is down.

When stock prices are down, it’s a SALE for long-term investors. Find good but undervalued companies, and shell out some extra cash to invest in them.

7. Diversify your investments.

Many investors will advise you to not put all your eggs in one basket. This is great tip that you always put in mind. It’s advisable to buy stocks of companies in different sectors or industries in the market. In your investments, don’t just put money in the stock market, but also invest in bonds, mutual funds and others.

8. Don’t be afraid of volatility.

One of the reasons why people are afraid of the stock market is because of its volatility. It’s always difficult to see your portfolio in red, or lose significant value during the year. Long-term investors have the advantage of riding through the market ups and downs

9. Know your costs.

It’s important to understand your investment costs when you are building and managing your portfolio. Stock brokers make money from transaction fees, which they charge every time you buy and sell. Additionally, there are taxes and other fees that you pay for each transaction. These costs may seem small, but they can eat up a lot of your potential income in the long-term, especially for pooled funds with annual management fees.

10. Review your portfolio at least once a year.

The min of objective of investing is to achieve a financial goal. It’s therefore crucial to check at least once a year if you are still on track towards achieving investment goals. You can choose to invest more money, or move some of it towards another stock or investment.

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