Long-term investing is an investment strategy where a position is taken in a stock, a market, a currency, or a commodity and is not sold for at least a few years. Proponents of long-term investing believe this buy-and-hold pattern will pay off in the long run.
The danger with long-term investing is staying with a position that continues to lose money. The most important aspect of long-term investing is to evaluate the investment thesis constantly. Things change. If the change alters the investment thesis, then an investor needs to sell and move on. If the thesis still works, then the difficult part is staying with a losing position until the market turns and proves the thesis right.
Success in the stock market is all about balancing risk and reward. Too much risk and you leave yourself vulnerable to added downside when the stock market turns, as may be the case at this time. However, too little risk and you don't fully partake in the upside moves of the stock market, though your downside risk is lessened. The key is to understand the stock market we are in and alter your investment strategy accordingly. Prior to the flush in the stock market on Wednesday, technology growth and small-cap stocks were leading the broader market higher this year. Yet as we also witnessed, the higher-beta stocks were also vulnerable to added selling on Wednesday. What happened on Wednesday (and what hap ... Read More
Oil prices are on the downside, and we could see West Texas Intermediate (WTI) oil decline to the $40.00 level and below. A few years ago, the mere mention of oil in the $30.00 level would have been viewed as silly, as many believed $100.00-a-barrel oil prices would be the norm. But here's the problem: the advanced fracking technique to squeeze out oil from the cracks in the rock led to a revolution in oil production, which inevitably is hurting oil prices. The good news: it’s creating an investment opportunity for aggressive investors.
Pressures Pushing Oil Prices DownwardNow, we have massive domestic oil production from the shale oil in Montana and North Dakota that has helped to produce a flood of oil i ... Read More
The stock market continues to want to edge higher, but beware. I still sense there will be more downside moves that will provide a trading opportunity. At this juncture, I would be looking for sell-offs in the stock market and chaos. Just like what we saw in 2008 when the stock market and big banks crashed, when a stock market correction comes, there will be aggressive trading opportunities for more active traders.
Stock Markets Down, but Bigger Adjustments AheadThe strengthening dollar will make American goods and services more expensive for exports, which will likely result in a squeeze on the profit margins of multinational companies that do much of their bus ... Read More
When Lehman Brothers Holdings Inc. crashed after the impact of the sub-prime financial crisis in 2008, the financial sector was turned upside down. Regulators made a bold and smart decision to clean up the banking sector and its somewhat secretive high-risk activities. Fast-forward nearly seven years, and the banking sector is clearly stronger and more trustworthy than it has ever been. Investors can thank the annual Federal Reserve bank stress test for this.
Fed’s Stress Test Making Banks the Safest Investment for Long-Term Investors?The Fed’s financial crisis stress test aims to analyze the stability of the country’s largest banks with assets of more than $50.0 billion. It includes both a round ... Read More
If you haven’t already done so, you should start to take a closer look at small-cap stocks.
Small-Cap Stocks Outperforming in 2015While small companies underperformed in 2014 with the Russell 2000 gaining a mere 3.53%, compared to the 13.40% and 11.41% advances by the NASDAQ and S&P 500, respectively, I believe that as the long as the economic renewal holds, small-cap stocks could turn things around this year. So far in 2015, small-cap stocks are second only to the technology sector. The Russell 2000 is up 2.10% as of Thursday, versus a 4.88% move by the NASDAQ. At this time, small-cap stocks are beating the S&P 500 and DOW; it’s still early on, but it’s looking good coming off of a soft ye ... Read More
The third season of House of Cards will likely once again see a massive influx of new subscribers flow to Netflix, Inc. (NASDAQ/NFLX). The company is sizzling on the chart and is the “Best of Breed” in the video streaming market at this time. Netflix currently has about 57 million subscribers. Having said that, my stock analysis shows that the top-heavy valuation will need to be fuelled by better top-line growth, especially from the international markets where Netflix is dominant. The company already offers its streaming service in about 50 countries, but it is aggressively aiming to expand into h ... Read More
One of the most hotly debated topics these days is the role of activist investors. Some people have the impression that an activist investor is not a positive factor when it comes to long-term investing. I disagree, as many times, the investment strategy recommended by these activist investors ends up benefiting all shareholders. Probably the most well-known, and certainly the wealthiest, activist investor is Carl Icahn. One of the things I like most about Icahn’s investment strategy is that he is willing to buy when others are selling and be vocal about his intentions. A pe ... Read More
With a long-term portfolio, the goal is to earn a constant rate of return over a long period. Sadly, even with this in mind, investors end up making decisions that jeopardize their long-term objectives. They make mistakes, but luckily, the effects of these mistakes can be easily controlled, saving their portfolio from disaster—it all comes down to these three principles of smart long-term investing that every investor needs to know when building their long-term portfolio. When There’s Rising Optimism, Go into Protective Mode Too ... Read More