A colleague recently raised an interesting question: How should we invest when our long-term is not as wide as before?
I had to laugh because it was invested “Long term” Sometimes used as a way to reduce losses from short-term misplaced investments! And if we stay in the fall of our year, that option could lose some of its strength.
But after my initial laugh, I sat Bolt straight as if polished. And it was due to the sudden realization that something far away from my 60th birthday. My colleague was talking about people like me!
First of all, though, I think a long-term investment horizon is a good strategy. But only when good quality business is growing, and when buying stocks do they have a fair valuation. The technique is not to blame, but my ability to use it is declining over time.
Short-term investment strategies
Fortunately, long-term investing is not the only strategy that can succeed in the stock market. Many stocks can show good progress in just a few months or years.
For example, an early investor in an emerging growth company can make a quick profit. It is true that operational progress may take time to become fully mature – perhaps years. But early signs of revenue and earnings growth could put small companies on the radar of more investors. And one of the great drivers of a stock’s gains may be determining the re-rating, as the story of an increase became widely known in the investment community.
When this happens, a stock may move higher in a shorter period of time. In fact, a 10-fold earnings assessment could increase earnings by just 30 times a month compared to a year. But that is not always the case.
Another possible short-term strategy is to trade strong stocks on an valuation basis. And Peter Lynch did a lot of things when he ran Fidelity’s Magellan Fund in the United States. So, here in the UK, I can focus on stocks FTSE 100 Indicator or FTSE 250. They need to buy when a stock’s valuation cycle is low and sell more when it cycles again. In his books, Lynch talks about short-term gains of between 20% and 50% with that strategy. But I’m not sure I can replicate his success.
Thorough research is the main topic
Short-term strategies like these two concepts still require thorough research before buying. I want to make sure that I am working with a tough business that is not facing any major operational challenges. But even then, nothing is certain, and they may lose money on shares even after my verification-selection.
But for a short-term strategy, I would consider selling shares to stop losses before going too far. After all, I won’t have enough time to stay underwater with an investment for 15 years or more. That way, I would stay in good company because successful investor Lord John Lee thinks he also uses stop-loss strategy.
And 60 and beyond, I want to balance short-term strategies with the cash-in-hand approach to investing. And to achieve that, I will invest in carefully selected dividend-paying stocks.
For example, I would consider such stocks as:
5 stocks to try to make wealth after 50
Coronavirus epidemic disrupts markets around the world …
And many big companies that are trading at ‘discount-bin’ prices may now be able to bargain for potential investors.
But whether you are a novice investor or an experienced professional, deciding which stock to add to your shopping list can be a risky prospect at such an unprecedented time.
Fortunately, The Motley Flower is here to help: We have five companies shortlisted by the UK’s chief investment officer and his analyst team that they believe have the potential for long-term growth despite a global lockdown.
You see, here in The Motley Flower we don’t believe that “over-trading” is the right path to financial freedom in retirement; Instead, we are in favor of purchasing and holding (for at least three to five years) 15 or more quality companies, led by a shareholder-centric management team.
That’s why we’re sharing the names of these five companies in a special investment report that you can download for free today. If you are 50 or older, we believe these stocks can be suitable for any diversified portfolio, and you can create a position in the top five right now.
Kevin Godbold has no position in any of the shares mentioned. Motley Flower UK has no position on any of the shares mentioned. Opinions expressed in the companies mentioned in this article may differ from those of the author and therefore our official recommendations in our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.