It’s no secret that 2020 was a difficult year for the stock market. In fact, it was the worst year ever for bonds (by a landslide) and the seventh worst for U.S. stocks (S&P 500) on record. Although we’re still in the early stages of 2021, the stock market has been making some gains. This has some investors looking for ways to invest in stocks for the long-term. The good news is that there are a number of strategies that can help investors make smart decisions when it comes to long-term investing in stocks.
This approach is known as value investing, where the goal is to hang on to a top-performing stock rather than trade stocks based on short-term trends. Value investing is a popular strategy for long-term investors because it focuses on the fundamentals of a company rather than chasing quick profits. Warren Buffett has long praised the practice of long-term investing when it comes to stocks. 'The world is full of foolish gamblers, who are always ready to risk their hard-earned money on the turn of a card, the roll of a dice, or the spin of a wheel,' he once said. 'But wise investors never risk their money on anything they don't understand.'
Another popular strategy is to invest in blue-chip stocks. These are stocks from large, well-established companies that have been around for a long time and have a proven track record of success. These industry leaders have competitive advantages that make them good long-term investments. When Warren Buffett speaks, people tend to listen. He is a big proponent of blue-chip stocks and says that 'You only have to do a very few things right in your life so long as you don't do too many things wrong.'
Some investments get sweeter the longer you hold them. Johnson & Johnson's (JNJ) looming spinoff could accelerate growth, and soon. NextEra Energy (NEE) has consistently outperformed the S&P 500 over the past five years. And shares of Microsoft (MSFT) have had a fantastic run since March 2020. All of these companies are well-positioned for long-term growth and make great long-term investments.
So, investors should focus on their long-term strategy and scoop up quality stocks McDonald's (MCD), Verizon (VZ), Salesforce (CRM), Humana (HUM), and other blue-chip stocks. It's important to remember that the stock market can be unpredictable. As such, investors should also be prepared for some volatility.
When it comes to long-term investments, it's important to remember that the stock market can be unpredictable. As such, investors should be prepared to ride out any short-term dips. This means maintaining a diversified portfolio and having a plan for when the market takes a downturn.
It's also important to remember that the stock market is always changing. Just recently, the 10-year Treasury yield took another run at 4%, as stocks chopped lower in afternoon trading. With the Federal Reserve continuing to keep interest rates near zero, investors would be prudent to brace for a near-term market downturn.
Finally, investors should consider the concept of mean reversion when investing in stocks. This theory states that stocks that have performed well over the short-term are likely to underperform over the long-term and vice versa. Hardly surprisingly, that stock is trading down more than 9% in the after-hours trading session. Their theory suggests that to make a long-term investment more successful, investors should focus on buying stocks that are currently undervalued.
In conclusion, there are a number of strategies that can help investors make smart decisions when it comes to long-term investing in stocks. Value investing and investing in blue-chip stocks are two popular strategies that many investors swear by. Investors should also be prepared to ride out any short-term dips and consider mean reversion when investing in stocks.
