The Best Long Term Investments – If you want to get wealthy, then you better start thinking of making great investment choices. But how do you do that? Today we share with your invaluable tips on how to spot a great investment. The fundamental for all good investments is that they should be profitable. Let’s talk about the other factors to consider. Let’s start over here;
10 Top Tips to Spot The Best Long Term Investments
1) Consider New Markets
Everyone follows the same trend and sticks to the common investment routes on the US stock exchange. There’s nothing wrong with this, but it can limit the options and it is where every Rick and harry is looking. Instead, you can expand your horizons to other boundaries and you could end up discovering great opportunities. We’re not saying to ignore the US market entirely but look into other regions too. You will be surprised at what opportunities are out there. Follow the rest of the tips on this video and you won’t go wrong.
2) Get a Chart Analysis
Whether you want to invest in stocks or trade currency or whatever other asset you will need to analyze the chart data. All sectors show the movements of the prices over time and by analyzing it you will be able to understand and track the asset over time. Spotting a great investment requires one to have the skills to analyze the charts properly and use the analysis report to identify the opportunities.
By using chart analysis, you will also be able to know the investments to skip. Many investors today use indicators such as the average price movement and so many others. It may sound complicated but there are so many apps that make it so much easier. A chart analysis will also help you to know when to invest and when to sell. The golden rule is to always buy when the prices go down and sell when they go up.
3) Get Advice
If you’re a beginner it may be hard to know where to start as you search for investments worth putting your money into. Many people don’t have the time to do the needed research or take on any of the tips listed here, if this is you then you can hire an expert to advise you. Of key importance, if you decide to go this way, is to take advice from people who have a proven record of making great investment decisions.
Don’t shy off from asking for numbers. Ask them straight up what they have done in the past and how much they have earned for their clients through managing their portfolios. To make sure they’re not all talk, ask for some proof.
They may not be able to show you everything but they can at least provide you with some solid evidence of their abilities. Also, don’t get information from online blogs and forums. Identify an expert with experience and set up a meeting which could be in person or virtually depending on how they work. This could cost you some money, but it’s one of the safest ways to go about investing.
4) Watch the News
The best way to find out which companies are the best to invest in is by watching the news. Create a routine of periodically watching the news whether it’s the first thing you do in the morning or whether you prefer to set automated notifications on your phone from the news apps, you have to stay ahead of financial news. If you don’t want to blindly jump into a trend without the right information make this your daily habit. By doing this, you will be able to find new opportunities and make more informed decisions. Today in the modern world we live in with multiple news sites, apps, and social media, it has never been easier to do so.
5) Find Out How the company Makes Money
They say successful businesses are those that have an easy-to-understand business model. The way a company makes money shouldn’t be complicated. It should be as easy as one plus one is two. For example, Company X manufactures Product A and sells at price B through channels Y and Z. If you are finding it hard to understand how a company works and its revenue streams then leave it at that and look for other companies. You should also be able to identify the major cost inputs for a company.
For example, a tire manufacturing company is greatly affected by the pricing and availability of rubber. I bet you are wondering how this information is useful, right? The reason behind understanding a company’s business model is the fact that this information will help you understand when to buy or sell the shares. For example, Warren Buffet doesn’t invest in oil companies but he invests in freight companies and often adds his investment amount whenever the oil prices go down and create favorable conditions for companies in the sector to be more profitable. Hope it all makes sense now.
Let’s go on to the next tip.
6) Look at The Dividend Rate Policy
Every company that has gone public has a dividend policy. Go ahead and read through the fine print which should be posted on their official website and find out their dividend rate and the payment terms whether it’s yearly or quarterly. This will indicate how much you could earn at the end of every period from dividends. Choose companies with a higher dividend rate and a more frequent payout term that is quarterly or monthly, though monthly dividend payouts are very rare to get. So why is this so important? Well, by buying shares there are two ways you can earn money, one is through the capital gains once the share price appreciates and you sell them at a higher rate or through dividends.
An attractive dividend policy will have you smiling at the bank! Also, great companies have a history of making their shareholders happy. They have a history of increasing the dividend rate annually rewarding them with more money, year after year. In other words, you want to put your money where the execs running the show have your best interest at heart.
Good companies have a history of returning surplus cash in the form of intelligently executed share repurchase plans or a dividend that grows at a rate comfortably more than the broader rate of inflation in the economy. In other words, you want to go into business with executives who have your best interest at heart. You want them to nurture an environment that measures success by how the firm does for you, the owner, as well as other stakeholders such as employees.
7) The Company Has High Returns on Capital
Once again you have to go through the numbers. The ability of a company to generate returns over a longer period is determined by the returns on capital the company generates. The best companies are those with high returns and low debt rates. In short, the companies can churn out cash from the available capital and resources without having to borrow much money.
8) Durable Competitive Advantage
Find out the industry the company is in then look at the products or services it manufactures. Then look at the customers who consume the products or services, are they loyal to that particular brand?
Is it an industry where consumers are specific?
If so, what position does the company hold in the market?
Does it have a strong competitive advantage?
Do people prefer the service or product to other companies?
Do they hold trademark secrets to their manufacturing process?
For example, Coca-Cola, which has manufactured the same recipe for years and no other company has been able to create the same product. Well, Pepsi has tried, but that’s an argument for another day. The main point is to choose companies with a strong competitive advantage this will make your investment more secure as the chances of the company facing high competition and eventual losses is minimal.
9) Shares are Sensibly Priced
The best businesses in the world can be the worst investments if the price point isn’t right. Price is so important as it can determine whether you will make a profit or loss from your investment, especially if you are investing for the long run. Most investors look for underpriced assets buy them in bulk, then sell them when the real or actual price resumes making a substantial profit.
If you buy an over-priced share that could have been valued that way due to market forces or speculation, you stand a chance to lose a lot of money when re-valuation occurs and the real value replaces the over-priced one. The ideal situation will be to find a company whose share price is fair or under-valued.
10) The Company Can Survive Tough Stretches
‘The company can survive economic turmoil. Changes in the economy are inevitable and they don’t announce when they want to hit hard. Look at the current pandemic; the Corona Virus and how hard it has hit the entire world-threatening a global economic recession. It may be impossible to mitigate such risks as they are beyond the control of the executives in the companies.
But you can research the history and see how these companies have handled such situations. For example, the financial crisis of 2008 is a great research point. Look at how the company was affected during the period and how it handled the situation. Look at the period it took, the measures the company employed, and judge whether it can survive the inevitable tough stretches. Some companies have still not fully recovered from the crisis but some were able to recover within record time.
We’re done with the top ten tips on how to spot a good investment, but it won’t hurt to add one more. The least considered factor which is of key importance is the management team. 90% of the companies that are led well become successful. Therefore, it is important to look at the top management, find out who they are, what experience they possess, and their history.
Have they run successful companies in the past?
Do they have a good track record of transparency?
There are so many businesses with wonderful economics but horrible management, what you’ll find in such cases is that the admirable financial performance is short-lived. Managers who don’t have integrity will take advantage of the company through over-generous salaries, obscene options grants, and questionable deals which could run down the whole business. As you decide which company to invest in, take a hard look at the key decision-makers! This is one rule Warren Buffet lives by, and just see how far it has brought him.