Long Term Investing – What Are the Best Strategies?

When it comes to long-term investing there are lots of different approaches you can take. However I think there are basically two main strategies that will generate the best returns in the long-term (by which I mean 5, 10, 15 years, etc).

The first is the classic Warren Buffet style of investing. His investment style has developed and evolved over the years but he basically likes to invest in the largest market leading companies that have a long and established history (and are likely to remain market leaders in the years to come). These companies are very attractive because they will generally increase both their earnings and their dividend payouts every single year (and will have a long and established record of doing so). We have many more Investing Help Articles Now Available.

As a result of this the share price will generally move higher as the years go on to reflect this growth in earnings. For example if a company is currently trading at $50 and has generally traded on a P/E multiple of around 10, then if the earnings are currently $5 per share and are expected to grow by 10% each year, you would expect the share price to go up by roughly this amount with all things being equal.

Of course the stock market is never as efficient as this, and there will always be peaks and troughs along the way. However if you look for market leading companies that are likely to continue to show growth in earnings and dividends each year, you should do very well in the long run, particularly if you time your entry point and buy shares when the price is temporarily oversold.

The other strategy is simply to only invest money into the stock market after big sell-offs. This is not for the faint hearted but if you look to buy when everyone else is selling, you will often generate the biggest profits.

For example if you had bought shares in some of the large cap stocks or purchased shares in an index tracker, for instance, after the Gulf War or when the banks were in serious trouble last year, then you would have enjoyed some huge gains in the subsequent months and years. The key is to look at the P/E ratios and future earnings prospects for many of the large stocks that comprise these major indices, and decide if they are now good value after one of these sell-offs. If they are, then you just need to snap them up and hold onto them for the long-term.

Many investors don’t have the patience to buy shares for the long-term. However both of these strategies can be used to generate some excellent long-term profits. We have many more Investing Help Articles Now Available.