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 securities today are those of American companies; it is these assets that account for the largest number of transactions on stock exchanges.
But you shouldn't limit yourself to US stocks; European and Asian markets are equally interesting. However, you should be wary of overly investing in the securities of companies from unstable countries, as political instability or military conflicts can destroy even the most successful enterprise.
Industry
Every investor has their own taste, but I prefer traditional industries such as medicine or pharmaceutical production, green energy, IT technologies, and food production.
You can also pay attention to companies involved in the extraction of minerals such as copper, platinum, lithium, and titanium. Demand for these products is growing every year, and with it, prices, which means the profits of such companies and their value will also increase.
Purchase price
The first instinct that arises when choosing a security is to buy a brand, because we are used to buying what is advertised and is in the greatest demand.
But this doesn't work in the stock market. Those who bought Google shares at $3 made the biggest profit, and over the next 20 years, their value has increased 40-fold. It's hard to imagine this trend continuing and the stock's price rising to $5,000 in the next 20 years.
If you're looking to invest in stocks long-term, it's best to buy securities priced no higher than $10. This way, the chances of price appreciation are much higher.
Should you focus on dividends when making long-term stock investments?
It's a mistake to use dividend yields as a guide when choosing stocks, as the potential for price growth is much greater than dividend income, which doesn't always even outweigh inflation.
Rarely does anyone pay dividends of more than 5% per annum, meaning over 20 years you will earn about 100% profit, while the same Google shares have grown by 4000% over this period, the difference is more than noticeable.
Therefore, we focus on companies that use profits for development, thereby increasing their value, rather than handing out money to shareholders.
New companies on the stock exchange
Not all companies start trading on the stock exchange immediately; most enter the market after reaching a certain level.
The first time a security is offered on the stock exchange, called a listing or IPO, is a very opportune time to buy. With the right choice, the stock you buy can generate substantial profits within just a few days of trading.
Read more about the IPO at https://time-forex.com/inv/akcii-ipo
Undervalued companies
Many of the securities that are very popular 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
ВА — non-current assets;
ОА — current assets;
ZU — founders’ arrears on contributions to the authorized capital;
DO — long-term liabilities;
KO — current liabilities;
DBP - income of future periods.
That is, an overvalued security is a bubble that can burst at any moment, so it is better to buy undervalued shares; their real value should be higher than their stock exchange quotes.
Where is the best place to buy shares for long-term investments?
There are many options that can be used to make long-term investments in securities:
Brokerage firms are the simplest option. You can purchase a block of shares from a broker either with your own money or using leverage . If you purchase shares from a broker, you 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 may also offer their clients the opportunity to open a securities transaction.
Overall, it's a pretty good option, although sometimes, to begin investing, you'll need to confirm your investor qualifications and deposit a fairly substantial amount into your account.
If you want to buy securities directly, without intermediaries, on the stock exchange, you will need to open a legal entity and purchase a seat on one of the exchanges; the cost of such a seat can reach several million dollars.
