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How to Be a Great Long-Term Stock Investor

  • (0:45) - Buy and Hold Stock Strategy: The Power of Compounding
  • (6:50) - Tips To Manage Your Portfolio For The Long Term
  • (14:00) - What Type of Stocks Should You Be Buying?
  • (23:45) - Episode Roundup: AMZN, SBUX, FB, IBM, NVDA, PYPL, EL, NFLX
  •                 Podcast@Zacks.com

 

Welcome to Episode #286 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

This week she’s going solo to share her best tips on how to be a great long-term stock investor.

Have You Ever Owned a Stock for an Entire Year?

The average time for most stock investors to hold a stock is now about 5 ½ months, down from 18 months pre-pandemic.

That means for most investors, the thought of owning a stock for 5 or 10 years is very foreign. And investors will get out at even a hint of non-performance.

Amazon AMZN soared in 2020 after the coronavirus sell-off, gaining 74% between Mar 9 and Nov 9. But in 2021, shares haven’t gone anywhere, adding only 3.4% for the year.

How many investors have stayed in the stock this year?

Are you considering selling because other stocks are performing better even though you consider yourself a long-term investor?

3 Tips for Long-Term Investors

1.       Don’t look at your portfolio every day. There’s no reason to see how much money you are making, or losing, every single day. This is short-term thinking. It will distract you from your long-term investing goals.

2.       Buy some stocks that pay dividends. We all like getting “free” money. If you get a stock that stagnates for a year or more, getting a dividend can help smooth over some of the pain. For example, Starbucks SBUX stock went nowhere from 2016 to 2019. In those 3 years, it was up just 5.9% compared to the S&P 500 which gained 27%. However, it paid a dividend, which at that time was yielding around 3%. Not too shabby. It eased some of the pain until the stock finally broke out to new highs in the last 2 years.

3.       Dollar cost average on sell-offs. In 2018, Facebook FB was hit with all those issues surrounding privacy concerns. From July 2018 to January 2019, shares fell 33%. It presented a buying opportunity for long-term investors to add more shares “on sale.”

Be diverse in your portfolio. Own at least 10 individual stocks because you likely won’t be able to pick all winners.

For example, Warren Buffett bet big on IBM IBM a decade ago but then sold his position as it wasn’t performing as he hoped. From Sep 2011 to Sep 2021, IBM shares have actually declined 23% while the rest of the market was up big.

However, he owned plenty of other stocks that helped ease the pain of being in a stock that didn’t perform.

Additionally, you don’t need to buy in at the IPO to do well as a long-term investor.

While Netflix NFLX shares are one of the best performers of the last 20 years, if you bought it in 2012, 10 years after its IPO, you would still be up 7300%.

What else should you know about how to be a great long-term investor?

Tune into this week’s podcast to find out.

[In full disclosure, Tracey owns shares of AMZN, SBUX, and FB in her personal portfolio.]


Infrastructure Stock Boom to Sweep America

A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.

The only question is “Will you get into the right stocks early when their growth potential is greatest?”

Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.

Download FREE: How to Profit from Trillions on Spending for Infrastructure >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
 
International Business Machines Corporation (IBM): Free Stock Analysis Report
 
Netflix, Inc. (NFLX): Free Stock Analysis Report
 
Starbucks Corporation (SBUX): Free Stock Analysis Report
 
Facebook, Inc. (FB): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
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