Have you a long-term financialgoal? You may want to build an investment pot so youhave a comfortableretirement. Or you might bethinking aboutyour childrens future. Whatever your goal is, being a successfullong-term investor can make all the difference to you and your family.
But if this is your dream, how can you achieve it? Well,these are my secrets to reaching your long-term financial goals.
Recognise trends
Many people think that investing is basically pickinga few well-known blue chip companies. But there is a lot more to it than that. Understanding, recognising and investing in trends can make all the difference to your portfolio.
Think of some current trends and you will understand what I mean. One of the most dramatic trends of the momentis the end of the commodities supercycle. Oil, gas and metals prices are tumbling. This means you should be taking profits on companies such as Shell andRio Tinto, and should avoid investing in this sector. Likewise, you should be buying into companies thatare benefiting from low energy prices, such as IAG, easyJet andVolkswagen.
Stayin control of your emotions
Its amazing how people seem to invest as much of their emotions as their money in shares. If a share price shoots up they are elated; if it slides they are down. But I have learnt a long time ago never to be emotional about my investments.
You have to be in control of what Steve Peters calls your inner chimp. If you have a view about the strengths of a company, then that should not be affected however the market swirls around you. Think of yourself as the lighthouse in the storm.
Be contrarian
Being contrarian sounds easy, but, believe me,it isnt. Being contrarian is more than just buying into a company because its share price has fallen. After all, if the share price has fallen a lot it may mean that the business is actually in serious trouble, in which case you should be steering well clear.
Being contrarian is really about buying into a company when the market is seriously undervaluing your view of what the company is worth. Think of buying into Barclays and Lloyds at the time of the Eurozone crisis. Or buying into Quindell in December of last year, when it was making astonishing amounts of money, yet its share price was plumbing the depths.
But if the prospects of a company have worsened, or if it is fighting againsta trend, or it is just not making any money, then this is not a contrarian buy at all, and you should avoid investing.
At the end of the day, the fundamentals of a company should be your guide, not its share price.
Seek out winners
Many successfulinvestments are not contrarian plays at all. Think of chip maker ARM Holdings. This firms share price has just risen, and risen, and then risen some more. Why? Because it is a one of the tech winners of the 21st century. To design, and own the intellectual property of, just about every chip in every smart phone, tablet and smart watch on the planet is quite some feat. It is no surprise the company is so highly valued.
Be patient
Warren Buffett has said many a time that, in the short term, the market is a voting machine but, in the long term, it is a weighing machine.
Share prices fluctuate all the time. You need to look through the noise to understand what the long-term prospects of the company are. If the firm is growing revenues and profits steadily then, at some point, the share price will follow.
Know your own limits
You know what strikes me most about Warren Buffett? His self-effacing modesty. He still works in the same, rather run-down office in Omaha, Nebraska. Hestill lives in a 5 bedroom suburban detached house.
He will just as often tell you about his weaknesses as his strengths, including the fact that he never invests in tech, and he never invests in things he cant easily understand.
How, I hear you ask, can a man with so many weaknesses be one of the worlds greatest businessmen? But, you see, you are looking at things the wrong way.
It is exactly because he is soaware of all his weaknesses that he is the worlds most successful investor.
We at the Fool are firm believers in long term investing. Instead of trading in and out of shares, we want to invest inbusinesses which we think have bright prospects decades into the future. And we have carefully picked a series of companies which we confidently predict that you can holduntil your retirement.
Want to learn more? Well, just click on this link to read “The Fool’s shares to retire on”, and it will dispatched instantly to your inbox.
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Prabhat owns shares in easyJet, Barclays and Quindell. The Motley Fool has recommended shares in ARM Holdings.