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wikiHow to Make a Long Term Stock Investment

Three Parts:ResearchingInvesting In The BusinessKnowing When To SellCommunity Q&A

Investing in stock may seem daunting, but some basic principles can help you make sound decisions as you decide where to invest. This article will explain how to identify and invest in businesses that are good, long-term stock investments.

Part 1

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    Look for businesses with little chance of collapsing in the near future.  For example, the food industry is something that will last for a long time, because no matter how far we advance with technology, we will always need food.  Businesses that rely on paper, on the other hand, could go bankrupt in the future as technology makes paper less important.
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    Look at the past.  Knowing how a business has suffered or grown through its history can be very helpful when looking for long-term investments.  Businesses that have nearly collapsed because of lawsuits are best avoided. These companies may be unstable and unsafe investments. Instead, look for companies with strong records of growth over time.
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    Look for businesses you understand.  Investing in a business you cannot understand leaves you in a position where you'll never be certain when to sell your shares or when to buy more of them.

Part 2
Investing In The Business

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    "Buy low." After you have thoroughly researched a company and are sure that it's a good investment, watch the price of its stock.  Never invest in a business right after the stock has risen dramatically. It's likely to drop back a bit in the near-term before possibly continuing its climb. It's better to "buy low," meaning you should wait for the price to fall a little before you invest.
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    Buy more whenever possible. Once the stock has indeed fallen a bit, buy more of it, assuming you still think the company is worth investing in. Stock prices fluctuate continuously. Wait for a relative low in the price and then make your purchase.

Part 3
Knowing When To Sell

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    Keep monitoring the stock's price. If you decide to sell the stock, wait for a relatively high point in its price. An exception to this rule occurs when fundamental conditions surrounding the company have changed. If the company appears to be suffering genuinely hard times and its stock price is plummeting, it may be time to bail out and take the loss. If you see a price drop as part of the normal cycle in any business, don't be tempted to sell. You'll simply "lock in" a loss just prior to seeing the price bounce right back (as it usually does in the case of most stocks).
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    Don't sell all of your shares in the company. If you're sure a company is on its way to bankruptcy or some other disaster, sell everything. Otherwise, if the company is merely suffering the same kind of hard times most businesses experience occasionally, you might consider divesting yourself of some of your shares, but hold on to the rest of them in recognition of the fact that an improved share price is likely in the future.
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    "Sell high." The time to sell a stock is when it is at a relatively high point in its historical pattern. If it really is the good investment you judged it to be in the first place, its stock will continue to trend upward over time, presenting you with occasional highs. Think of those as sell points. 

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    Article Info

    Categories: Investments and Trading | Financial Stocks


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