How to invest in stocks for long term

3-Jan-2019 • 3 min read

Recently I started researching about companies to invest after gaining decent profits in mutual funds. And I would like share some tips if you are a new bee trying to figure out how to choose companies for investing. Be informed that I am discussing investment for long term and not day trading. Without further ado, let's jump into the specifics.

Choose a company with unquestionable pricing power

How do you think Apple dictates the price with the every new model of iPhone? Apple is known for quality of hardware and software they sell with their products. They put a lot of effort in researching and maintaining that competitive advantage. Result, they have an enormous pricing power in the market. Guess what, people will buy even if the new model costs a 40% more than the previous one. Companies like Apple, Coca-cola have an enormous pricing power which makes them profitable. Research and find out such companies.

Company should be able to clear the debt with just 4 years of profits

Most profitable companies have a minimum debt which they can easily clear. Some companies operate on the borrowed money. If the company looses in one year, the debt burden gets increased apart from the operating costs. If the company is not able to recover, there goes down the drain your money along with the company. So, it is advised that you invest in companies with debt that can be cleared with 4 years of profit maximum.

Don't panic trade. Most companies would recover from a little loss over a period.

If a company is stock value over a period of time. Don't panic trade in that situation. It could be due to unavoidable factors which might have impacted entire market. Try to dig into the details and take decision accordingly.

Trend is your friend.

For short term trading, it is advisable to go with the trend and enter the trade at a situable point. This applies to long term investment as well. Don't just gamble your money expecting the stock to raise magically. Research and act accordingly.

Recently I started researching about companies to invest after gaining decent profits in mutual funds. And I would like share some tips if you are a new bee trying to figure out how to choose companies for investing. Be informed that I am discussing investment for long term and not day trading. Without further ado, let's jump into the specifics.

Choose a company with unquestionable pricing power

How do you think Apple dictates the price with the every new model of iPhone? Apple is known for quality of hardware and software they sell with their products. They put a lot of effort in researching and maintaining that competitive advantage. Result, they have an enormous pricing power in the market. Guess what, people will buy even if the new model costs a 40% more than the previous one. Companies like Apple, Coca-cola have an enormous pricing power which makes them profitable. Research and find out such companies.

Company should be able to clear the debt with just 4 years of profits

Most profitable companies have a minimum debt which they can easily clear. Some companies operate on the borrowed money. If the company looses in one year, the debt burden gets increased apart from the operating costs. If the company is not able to recover, there goes down the drain your money along with the company. So, it is advised that you invest in companies with debt that can be cleared with 4 years of profit maximum.

Don't panic trade. Most companies would recover from a little loss over a period.

If a company is stock value over a period of time. Don't panic trade in that situation. It could be due to unavoidable factors which might have impacted entire market. Try to dig into the details and take decision accordingly.

Trend is your friend.

For short term trading, it is advisable to go with the trend and enter the trade at a situable point. This applies to long term investment as well. Don't just gamble your money expecting the stock to raise magically. Research and act accordingly.