5 Signs of a Smart Longterm Investment


With a plethora of different securities on the exchanges, it is sometimes hard to differentiate a longterm investment from a quick flip. Yet using some small analytical techniques and the application of where you think a particular sector is going to go, you to make a good longterm investment. The ability to comprehend an investment will give you the inclination to either hold a stock for ten days or ten years. Here are five signs of a longterm investment to allow you to reach the biggest profit margin possible.

Sector Trends: As an investor, you need to have the ability to "look into the future." The hottest and most profitable businesses 50 years ago may be on their way out the door today. Traders who sought technology stocks as early as the Dot Com bubble in 2001 saw the sector's trends and took a gamble on the future and the potential valuation of the various companies like Apple Inc. (APPL), Google (GOOG) or Microsoft Corporation (MSFT). For example, investing in a pay phone distributor today isn't a good longterm investment with the creation of mobile devices. Many investors believe that the next big sector is the cannabis business.

Earnings and Cash Flow: Liquid assets allow a company to expand and venture into new endeavors. A company grows by not only expanding its primary business, but by purchasing other ventures. A website like Google.com allows (GOOG) Google to fetch huge earnings, but the company also merged with or acquired over 160 small businesses within the past 15 years to add further diversity to the company's model. Cash flow allows a company to invest in its utilities and production technology to become more efficient, and therefore save money and resources in the long run and gain valuable assets.

Historical growth: A way to analyze the future is to look into the past. A company and sector that has had a successful trend line for the past ten years allows you to, in a way, make an hypothesis of the future. Unless of course, something devastating happens, which is parallel to a company's press. For a stock to be around for a long time, prior to your investment, means that it has evolved to the market conditions. It is likely that the stock will do the same in the future to control its market share.

Dividend allocation: Receiving a dividend is a big sign of a longterm investment. The ability to get payed for holding a security is great no matter what monetary amount you have invested; it is all relative. Dividends are usually issued in compensation for a low-volatility stock, which is a relatively secure longterm investment. If you are looking for the "high risk, high reward" type of investment, you sometimes want to stray from the dividend paying stocks and look more toward the sector's trends.

Company Press: A company's current press releases show the stability and the dependability of an investment on a short-term basis. Although you will be holding the stock long-term, you also want to be aware of what the company is doing incrementally and currently. If you look at a company's releases and see that it is losing money due to market share, product failure and debt, then you might want to look at another company in the sector.

Longterm investing is one of the riskier ventures. You are betting on the company's business model to continue to grow in the future successfully. Not all securities go up over time; that is just the reality of the market. By using these five signs and strategies when picking a longterm investment, you will be able to better analyze an investment for your portfolio.

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