Most investors focus on investing in such a way that they would get extremely high returns within a short period without facing any risk of casualties. This is the main reason why investors always find the best investment plans where they can increase their capital in a few years with little to no risk.
However, the combination of high-return and low-risk is something that doesn’t exist in the investment market. In reality, the return and the risk factors are directly related. If you want a higher return, you’ll have to face higher risk and vice versa.
While choosing an investment campaign, you have to make sure your risk profile is associated with the risk of products before you start investing. Some investment options come with higher risk but are capable of generating higher returns within a short time. On the other hand, long-term investments come with lower returns as well as lower risks.
Here are the top 4 tips for successful long-term investment.
Paul Haarman Says Don’t Always Focus on the Small Stuff
Instead of panicking over the short-term movements of the investment, you should focus on the trajectory of the big picture. Make sure you’re confident while investing in a larger story. Additionally, don’t be confused by the short-term volatility.
Make sure you’re not overemphasizing the difference of a few cents you might save while implementing a limit versus market order. Even though active traders leverage the benefits of fluctuations to increase their gains, long-term investors achieve success depending on their period of investment.
Don’t Overemphasize the P/E Ratio
Many investors assume that focusing mainly on the price-earnings ratio will help them to achieve gain quickly, says Paul Haarman. However, this is wrong as depending too much on a single metric is not advisable. If you want to use the P’/E ratio, you need to use it in conjunction with multiple analytical processes.
Therefore, remember that lower P/E doesn’t implement the value of the security. Just because the P/E has gone lower, doesn’t mean the security is undervalued. Just like this, higher P/E doesn’t mean the company is overvalued.
Paul Haarman Suggests You Be Open-Minded
Despite being great household names, many good investments lack powerful brand awareness. This is why hundreds of smaller companies are capable of becoming blue-chip names any day. You might think that blue-chip investments aren’t worth the effort, but they are capable of generating higher returns than large counterparts.
Nowadays, the blue-chip companies in the United States are gaining more than 12% return while the standard return is 10%. Even though you should invest your entire portfolio in the blue-chip market, but there are many great blue-chip companies that you should consider.
Don’t Focus on the Penny Stocks
This is one of the most common mistakes rookie investors make while thinking of investment. Some investors believe that the risk factors of low-priced penny stocks are low. But whether your $10 stock decreases to $0, or your $100 plunges to the same, you’ve lost your entire initial investment. Therefore, both the stocks are riskier, says Paul Haarman.
Additionally, the risk factor of the penny stocks is higher than the average higher-priced stocks. This is because they are much more volatile and less regulated.
Conclusion
These are the top 4 tips for successful long-term investing. Before you start investing make sure you know the condition of the market. This way you’ll be able to prevent investing in irrelevant companies.
