Correct long-term investments in company shares
If you have a certain amount of free money, you always want to invest it with maximum benefit to generate passive income.
One of the most interesting and popular investment options is company shares; the current situation on the stock market is quite difficult, so the choice of an investment object should be taken as seriously as possible.
Today I want to talk not about short-term speculation in the stock market, but about long-term investments in shares, so that the investments made become an alternative to a classic pension.
There are a lot of criteria that serve as guidelines when choosing the most promising company in which to invest money. It is the company, not the shares, that is a mistaken approach to buying securities only on the basis of technical analysis data and faceless numbers.
A country
The most popular now are the securities of American companies; it is for these assets that the largest number of transactions are made on stock exchanges.
But you should not limit yourself only to stocks from the United States; European and Asian markets are no less interesting. But still, you should not get too carried away with the securities of companies from unstable countries, since political instability or military conflicts can destroy even the most successful enterprise.
Industry
Each investor has his own taste, I prefer traditional industries, such as medicine or medicine production, green energy, IT technology, food production.
You can also pay attention to companies engaged in the extraction of minerals, such as copper, platinum, lithium, titanium. Every year the demand for these products grows, and with it prices rise, which means that the profits of such companies and their value will increase.
Purchase price
The first desire that arises when choosing a security is to buy a brand, because we are used to buying what is advertised and is in greatest demand.
But this does not work in the stock market; the maximum profit was received by those who bought Google shares at a price of $3, and in 20 years they have risen in price 40 times. It is difficult to imagine that the trend will continue and over the next twenty years the price of these securities will rise to $5,000.
If you want to make long-term investments in stocks, then it is best to buy securities that cost no more than $10. In this case, the chances of price growth are much higher.
Should you focus on dividends when making long-term investments in stocks?
It is a mistake to use the amount of accrued dividends as a guide when choosing stocks. Since the potential for price growth is much greater than earnings on dividends, which do not always even cover inflation.
It’s rare that anyone pays dividends of more than 5% per annum, that is, in 20 years you will earn about 100% profit, while the same Google shares grew by 4000% during this period, the difference is more than noticeable.
Therefore, we focus on companies that use their profits for development, thereby increasing their value, rather than handing out money to shareholders.
New companies on the stock exchange
Not all companies immediately begin trading on the stock exchange; most enter the market after reaching a certain level.
The first placement of securities on the stock exchange is called listing or IPO and is a fairly good time to buy. With the right choice, the purchased share can bring tangible profits literally in the first days after the start of trading.
Read more about IPO - https://time-forex.com/inv/akcii-ipo
Undervalued companies
Many of the most popular securities are overvalued, that is, the price does not correspond to the real value of the company; this value is calculated using a simple formula:
Net Asset Value = [VA + OA - ZU] - [DO + KO - DBP]
Real value of 1 share = Net Asset Value/number of shares outstanding
VA - non-current assets;
OA - current assets;
ZU - debt of the founders for contributions to the authorized capital;
DO - long-term liabilities;
KO - short-term liabilities;
DBP - deferred income.
That is, an overvalued security is a soap bubble that can burst at any moment, so it is better to buy undervalued shares, their real value should be higher than the quotes on the stock exchange.
Where is the best place to buy stocks for long-term investment?
There are many options using which you can make long-term investments in securities:
Brokerage companies are the easiest option; you can purchase a block of shares from a broker, either with your own money or using leverage . If you bought shares from a broker, you will also receive dividends.
The main advantages of this option are the ease of opening an account, purchasing shares and the ability to place safety orders that will close the transaction if the purchased security begins to fall sharply in price.
A list of stock brokers opening transactions on the stock market is available at the link - https://time-forex.com/vsebrokery/brokery-fondowogo-rynka
Banks and financial companies can also offer their clients to open a securities transaction.
In general, it’s not a bad option, although sometimes, to start investment activities, you need to confirm your qualifications as an investor and deposit a fairly substantial amount into your account.
If you want to buy securities directly without intermediaries on the stock exchange, then you will need to open a legal entity and buy a place on one of the exchanges, the cost of such a place can reach several million dollars.