Posted on December 12, 2008 - by PanzerGrenadier

Holding the course: investing for the long-term

Photo by pheezy

This is one of the toughest challenges facing us in our journey towards financial freedom. The ability to buy and HOLD and not to be tempted by what is happening in the markets to sell either to cut loss or take profit

Equities have a role to play in our investment portfolio

Stocks and shares (or equities) have a role to play in our financial freedom journey. If you have an interest in general knowledge, about business and companies performance and are able to understand basic economics and how it works in the real world, investing
in equities is one way to grow your money if you take a measured, responsible approach to it. Punting or speculating on share fluctuations on a hourly, daily, weekly or monthly basis is NOT investing.

Even I get caught up in share speculation. I have done my share of buying stocks in companies in anticipation that by tomorrow, next week, next month, the price will go UP without fully understanding my reasons for picking up those stocks. Suffice to say, I also pay my due of tuition fees to Mr. Market in terms of losses on sale of such stocks.

However, the more I invest in the stock market, the more I realise that buying and holding quality blue-chip companies is still a strategy that works for me. It may not work for everyone since your style of investment
and your tolerance to risk would be different from me.

Here are some of my stock pick considerations in no order of merit. They are simply factors I consider before I make my decision to buy.

1) Profitability and Dividends
This goes without saying but you’d be surprised at how valuations of companies as reflected by stock prices during the dot-com days of the late 90s and 2000s sky-rocketed even when the companies were losing money year after year! When you buy a share, you are buying a part of the company because you want to participate in its profits and not its losses. But as a shareholder, you are exposed to both and hence you have to pick and chose those companies with a proven profit record and who pay you dividends. That is what I look out for. Read more…

Related posts:

1. The fallacy of long term investing
2. Calculating Long Term Profitability with Risk Reward Ratio
3. 3 questions to ask yourself before investing in stocks