Long term stock investment is a financial strategy in which an investor buys stocks with the intention of holding them for a long period of time, usually several years or more. In long-term stock investing, investors focus on finding companies with the potential for sustainable growth and stable profits in the future. This strategy offers greater stability and potential for higher returns than short-term investments, while also minimizing risk and transaction costs.
1. What is long-term stock investment?
Stock investment Long-term is an investment strategy in which an investor purchases financial instruments such as stocks, bonds or mutual funds with the intention of holding them for a long period of time, usually several years or more. The main objective of long-term securities investment is to generate profits and growth based on the increase in value of financial instruments over time. In this process, investors usually focus on building a diversified and sustainable portfolio, while being consistent with their investment strategy to achieve long term financial goals.
According to Investopedia, the stock investment and holding them for the long term is considered one of the most effective ways to accumulate wealth. Globally, the index representing the US stock market, the S&P 500, recorded losses in only 11 out of 47 years between 1975 and 2022. In Vietnam, according to a survey by Dragon Capital (DCVFM) in 2022, stocks presented an average return performance of about 16% per year since the market was born in 2000. The above examples show that the stock market is capable of generating stable returns.
Stocks are often viewed as an option. long term investment. The main reason is that the price of a particular stock can fluctuate wildly, even rising or falling by 10 to 20% or more in a short period of time. By holding for many years, investors have the opportunity to overcome short-term fluctuations and seek better long-term returns. While past performance is no guarantee of the future, long-term investing in stocks often yields positive results when invested for a sufficient period of time.
Characteristic
- Be patient and aware of volatility: Long term stock investment requires patience and a deep understanding of market volatility. Investors need to be able to tolerate volatility and not be affected by short-term fluctuations.
- Fundamental research and analysis: Long-term stock investment strategies are often based on fundamental research and analysis of companies or economic sectors. Investors need to understand the business, its financial health, growth prospects and related factors to make investment decisions.
- Build a diversified portfolio: Long-term investing typically focuses on building a diversified portfolio. By allocating capital across a variety of financial instruments, investors minimize risk and create opportunities for long-term growth.
Benefits and risks
- Benefit: Long-term investing offers the potential for higher returns than other forms of investing, as well as the ability to grow capital and profits over time. It also allows you to benefit from the growth and success of companies and industries.
- Risk: However, long-term stock investment is not without risk and does not guarantee profits. The value of financial instruments can fluctuate due to market and economic factors. Therefore, research, risk control and investment monitoring are all important in this strategy.
Fees and taxes when buying stocks long term
- Transaction fees: These fees are charged when buying and selling stocks. However, when investing for the long term and trading less, investors can reduce these costs.
- Capital gains tax: When selling stocks and making profits, investors are subject to personal income tax or corporate income tax depending on the type of investment and the country's tax regulations.
- Securities depository fee: This is the fee that investors must pay to the securities depository agency to maintain and manage securities accounts.
- Income tax on cash dividends: When receiving cash dividends from stocks, investors are also subject to corresponding income tax.
- Other securities transaction fees: Including ownership transfer fees, consulting fees, deposit and withdrawal fees, securities transfer fees, securities ownership certificate reissuance fees, securities freezing fees, securities account opening fees and account balance confirmation fees.
Depending on the exchange and the brokerage firm, these fees may vary in terms of rates and calculation. However, when investing for the long term, investors often trade less, so they can reduce many fees such as transaction fees and consulting fees. At the same time, if investors analyze and search for stocks themselves, they can also reduce some other fees such as consulting fees.
2. Should you invest in stocks long term or short term?
This is a question that many new investors often ask, because most people who have experience in stock investment know that both forms have their own advantages and disadvantages.
Long-term investments offer security and stability, but the return on investment is slow. On the other hand, short-term investments offer quick returns, but require a lot of effort to monitor the market, trade, and incur many tax fees. Long-term investments require analytical skills and the ability to find potential stocks as well as patience, while short-term investments require quickness and market awareness.
To minimize risk, the portfolio should combine both long-term and short-term securities, as well as stocks and bonds, and combine investments in many different industries.
So, should you invest in stocks for the long term? The answer depends on each person's strengths and preferences. Depending on the level of risk appetite and trading preferences, investors can decide to allocate the appropriate ratio of long-term and short-term investment capital.
For those who like to take risks, surf and trade frequently, they can choose the ratio of 50-50 or 40-60 for long-term and short-term. On the contrary, those who prefer long-term investment can choose the ratio of 60-40 or 70-30. The final decision should be based on thorough research and personal understanding of the stock market.
3. Notes when investing in long-term stocks
Buy stocks for long term investment is the act of an investor buying and holding stocks, bonds and other securities for a long period of time. Usually, long-term investment will last from 3 to 5 years, even 10 years or a lifetime. While investing in long-term securities, investors need to have a long-term vision and an overall view of the stock market. They should not be too concerned with the short term fluctuations on the market.
Long-term investors need to stick to their strategy and avoid being influenced by crowd psychology or FOMO psychology (Fear Of Missing Out), and should not pursue short-term trends. Daily and weekly index and price fluctuations should not be the basis for making selling decisions.
Investors need to identify the stock code are undervalued at the moment to invest for the future. When the market recognizes the exact value of a security, investors will have the opportunity to earn large profits.
Investors often choose the Dollar-Cost Averaging strategy. In this method, each person will invest a fixed amount of money in stocks periodically over a long period of time, regardless of how the stock price changes. This way, you can buy more stocks when the price is low and less when the price is high, and is a suitable and best choice for beginners.
In addition to avoiding market fluctuations, long term stock investment also generate significant amounts of money from dividends. This is money that companies distribute to shareholders when they are profitable. This is especially true of defensive stocks – companies that do well regardless of the state of the economy or the stock market. These companies typically pay regular dividends, often annually, to eligible shareholders.
If dividends are reinvested, compound profit will be more attractive to those who pursue a long-term stock investment strategy. Simply put, compounding occurs when the profits received are added to the initial capital. From then on, the profits generated are calculated based on the total initial capital and the amount of profits earned. This cycle repeats, the longer the capital is held, the higher the profits.
However, not everyone finds it easy to stay the course. Long-term investors often suffer from the fear of regret. They often do not trust their own judgment, preferring to react to the crowd, especially when the market is down. They easily fall into the trap of regret and choose to sell to alleviate that fear.
Too much attention to the stock market often robs investors of their chances of success. This group often tries to monitor the market too often. Instead, a long-term buy-and-hold strategy is not only simpler, but also more likely to yield better results.
However, those who want to pursue this strategy also need to consider some important factors. Age when entering the market is one of the important factors, affecting the construction of a suitable investment plan and time. Each person also needs to determine their risk tolerance, investment appetite and goals. Management long term investment stock portfolio And emotional control also plays an important role in the success of those pursuing a long-term stock investment strategy.
4. Stocks to invest in long term 2024
Below is a list of 10 stocks that are highly rated for growth potential and suitability. stock pick long term investment 2024:
- VIC – Vingroup Corporation: With diverse operations in many fields and prestigious brands, VIC is the top choice for long-term investors.
- HPG – Hoa Phat Group: With continuous success in many fields, HPG is highly appreciated for its growth potential.
- VJC – VietJet Air: As the first low-cost airline in Vietnam, VJC has strong growth potential after the pandemic.
- FPT – FPT Corporation: With its position as a leading technology corporation, FPT always attracts the attention of investors.
- VPB – Vietnam Prosperity Joint Stock Commercial Bank: VPB is one of the banks with high expectations for profitability and growth.
- PVT – Petroleum Transportation Corporation: With a leading position in the petroleum transportation industry, PVT promises to bring stable profits.
- GAS – Vietnam Gas Corporation: In the energy industry, GAS is always highly appreciated for its growth potential.
- DXG – Dat Xanh Group: Operating in the real estate sector, DXG is one of the top choices for long-term investment.
- VGC – Viglacera Corporation: With positive growth prospects, VGC is one of the stocks worth investing in.
- VNM – Vietnam Dairy Products Company (Vinamilk): With a strong brand and diversified operations, VNM is a safe choice for long-term investors.
