While some investors get lucky and make a fortune overnight, the vast majority do it over the long term. They pick a strategy that will serve them both now and in the future because they know that statistics are what will ultimately determine their success.
We live in a world of uncertainty. While a lot of people pick individual stocks, the evidence is that the majority of people lose via this method. The reason is simple: very few companies drive returns in the stock market.
The majority actually lose value over time, meaning that overall rises in the index are usually the result of the top one or two percent of companies massively outperforming the rest of the market.
Thus, if you want to make substantial returns, you have to pick a winner. And picking a winner isn’t easy since the probabilities are so low.
So what long-term strategies are available for investors who want to win? Let’s take a look at your options.
1. Sell Your Losing Stocks
The first thing to do is to sell your losing stocks. If a company isn’t shooting up right now, there’s a very good chance that it won’t in the future.
Losing stocks are massively overrated. Most companies can’t turn themselves around and add new value. Thus, the only logical option for the long-term investor is to sell.
2. Buy A Property Portfolio
The next step in long-term investing is to commit to a property portfolio – a mix of housing investments and commercial real estate.
This strategy tends to work better for most investors because it is more diversified. If you read Diversyfund reviews, you’ll discover that long-term returns can be quite good from this approach.
The reason is simple: you’re tapping into the rental market, and you’re not relying solely on general real estate price appreciation. In other words, you’re buying productive assets, not speculative assets.
3. Avoid Hot Tips
The financial news media loves giving out hot tips for their next investment pick. Studies on the effectiveness of their advice show it to be lacking.
Pundits get it wrong just as often as they get it right, meaning that following their advice won’t usually put you in any better a position.
4. Try Not To Hype Up The P/E Ratio
P/E ratios are helpful for investors who want to get a sense of the “price” of equity. But P/Es can be all over the place from year to year and season to season. That’s because company profits are extremely lumpy.
You never quite know when a firm will increase its expenses strategically to protect long-term profits, lowering its earnings and, therefore, its P/E ratio
If you love the P/E metric, make sure to average it over five years to see how the stock price performs in relation to it.
If you’re an investor who likes to dip into the bond market, you might also want to keep track of the overall P/E for the index. The higher it goes, the more sense it makes to switch to alternative assets.