The short-term traders often end up naming their short-term and loss-making trades as, “Investments.” This usually happens because they lose their derivative on cutting their losses. This is one of the most common and biggest mistakes people commit in the stock market. It is high time now we should understand that this is not an appropriate way of making investments. Consistent efforts and good knowledge is an apt way to secure something better and deserving.
It is equally crucial to stick to your discipline and learn the most important ways and methods to make long term investments.
Below mentioned are some important points which an investor should keep in mind before making long term investments:
Important and powerful mantras for value investing.
Importance Of Compounding
Tycoon investors like Warren Buffet, Rakesh Jhunjhunwala, Charlie Munger have always been recommending long-term investments because they clearly understand the power of compounding.
The power of compounding works effectively well over the long term. The results of equities over the long term clearly depict the longer number of years, the better results.
Always analyze the margin of safety
Understanding and keeping the margin of safety in whatever we buy gives us a cushion in case of any unpredictable negative events. It is always advised to buy stocks with lower intrinsic values. This ensures the margin of safety ahead.
Invest in a business you understand
The business you choose to invest in should be within your area of competence. When you will have a good understanding of the business it will help you invest better and more effectively.
Look for companies that have some competitive advantage
Always set your preferences with some increased competitive advantage. Companies like Ajanta, Pidilite, Colgate are good options to go with and have been registered with the Indian Stock Exchange as well.
Investment in companies seeking competitive advantage often act as barrier against brand name, entry, and pricing power for other companies trying to enter the industry and making an edge with supernormal profits.
Securing some idle cash
Keeping some idle cash is very important due to high volatility and risks in the market. This also helps to buy stocks in quantity when available at throwaway prices.
We have tried to brief down some most important and basic points for you to assist with investments in stocks. The crucial aspect of an investment in research and you should try to make your own statement rather than following up someone else’s investment style.