Long Term Stock Picks

What Are Long-Term Stock Picks?

Long-term stocks are the shares of companies that investors hold for more than three years. The main intent to hold these shares for that long is to get lucrative returns combined with strong future prospects. Long-term stock picks are mainly chosen based on the fundamental analysis, which includes the company’s financial health, growth potential, competitive advantage and industry trends.

Why Invest in Long-Term Stocks?

Investing in long-term stocks allows you to build wealth with a more stable means of investment options. Here’s why you should choose long-term stocks:

• Compounding: Compounding refers to the snowball effect of investing, it happens when you hold stocks for more than a few years. Over time, this exponential growth can turn your investment into a significant sum.
• Riding Out Market Volatility: The stock market may highly fluctuate in the short term, but historically, longer holdings have resulted in benefits for investors' interests.

How to Identify the Best Stocks to Buy for the Long-Term?

In order to analyse the best stocks to buy for long term, first you’ve to understand the company’s fundamentals. These evaluations include what value the company brings and how it is beneficial for businesses or consumers. Once this analysis is done, you’ll have to analyse some of the financial aspects. Some of the key aspects for long-term stock picks are as follows:

• P/E Ratio: The P/E ratio measures the current market price of the company against its Earnings Per Share (EPS). A high P/E ratio means that investors are paying much more for the stock than its earnings.
• Look for Dividend Paying Stocks: Established companies in the market often pay out dividends to shareholders.
• Analyse the Company’s Profit: In order to pick stocks that are good for long-term investing, look for consistent growth across companies.

How to Invest in Long-Term Stocks?

To invest in long-term stocks, you’ll pay the full price of the shares upfront, and they are stored in your demat account. Here is how you can invest in such shares:

Identify the stock that is suitable for investing for more than three years.

• Open the broker’s platform or website, tap the search icon and type the company name or its ticker symbol.
• On the stock’s page, select between ‘invest’ and ‘intraday’.
• Select invest option; this option ensures that you’ve bought the stock for delivery.
• Confirm the trade and pay the amount depending on the number of shares you’ve bought.
• Once you buy stocks, it may take approximately T+1 day (one business day) to reflect in your demat account. *The steps discussed above give an overall overview. The actual steps may slightly vary depending on the platform you are using.

Risks & Challenges in Long-Term Investing

While long-term investing has the potential to mitigate the impact of daily volatility, there are a few factors to that may become limitations:

• Systemic Market Risk: There is a possibility of a market crash because of significant economic events like recessions, geopolitical instability or pandemics.
• Inflation: Be cautious to invest in stocks that give you returns more than the inflation rate so that you can earn a worthwhile amount.
• Liquidity Risk: The potential difficulty of converting your assets back into cash quickly without significant variation may also persist sometimes.

How to Diversify Your Portfolio for Long-Term Stock Investment?

The true meaning of diversification is situated in spreading funds across different areas. The main goal is to buy different types of stocks, ETFs (Exchange Traded Funds) and any other types of securities. In this aspect, here is a quick overview of how you can select good stocks to buy for long term:

• Asset Class Allocation: The strongest layer of diversification includes spreading capital across different asset classes because each of them reacts differently to the same economic event
• Sector and Industry Spreading: Spread your investment in different sectors like banking, technology, healthcare, energy and more so that you can leverage all of their growth potential.
• Market Capital Mix: This strategy includes balancing investments between large-cap, mid-cap and small-cap companies
• Geographic Diversification: This means that you invest in stocks from foreign markets, like U.S. stocks .

Why Choose Kotak Neo for Long-Term Investing?

Kotak Neo combines reliability with the research depth of a bank-backed broker with a lightning-fast interface. Here’s why they can be an excellent medium for investing in the securities market:

• In App Expert Research: Kotak Neo gives you access to ‘Fundamental Call’ and long-term research reports from the expert team so that you can pick quality stocks with ease.
• Zero Brokerage For Youth Investors: The specialised feature ‘Trade Free Youth’ plan allows you zero brokerage fees on all trades for investors under 30 years of age.
• Automated Stock SIPs: The platform features a strong ‘Auto-Invest’ tool that allows you to set up systematic investment plans for individual stocks or ETFs.
• Margin Trading Facility (MTF): Kotak Neo allows you to buy delivery stocks by paying only a fraction of the value and borrowing the rest. This step is useful for investors looking to amplify returns on high conviction sectors.
• Integrated Smallcase Access: The platform has deep integration with Smallcase, which allows you to invest in professionally managed ‘baskets’ of stocks based on themes with a single click.

Conclusion

Investments in the share market for an extended period require a disciplined approach of careful research, patience, and diversification of stocks in different categories. The strength of compounding can also be used in terms of concentrating on the strong basics of companies you are investing in, risk management and remaining invested for three or more years. With the right strategy and reliable platforms like Kotak Neo, you can select long-term share to buy in a structured way.