Long-Term Equity Investment Strategy

“If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.”

 

This piece of wisdom by Warren Buffett, one of the most successful and legendary investors of all time indicates the need to keep a long-term investment horizon.

 

When it comes to investment options for a long period, it makes sense to include equities in your portfolio. Historical data shows that long-term investment stocks outperform other asset classes such as fixed-income securities, real estate, and gold. The real returns from equities held for at least 7-10 years beat the market volatility and inflation. The compounding factor also amplifies the equity returns.

 

However, equity investment calls for the right and clear strategic approach to mitigating the risk of negative returns and helps maximise your returns. Here are the three fundamental equity investment strategies to bear in mind:

 

Value Investing

 

This is an equity investment strategy that focuses on investing in companies with undervalued stocks. Such stocks are under-priced – this means that their value is less than their worth. Energy and FMCG companies are considered ideal for value investing. 

 

The purpose of value investing is to buy these stocks at their discounted rate and sell them when they reach their intrinsic value so that you can make a profit.

 

Growth Investing

 

In this equity investment strategy, you invest in equity stocks of companies that are expected to perform better than the market or industry average. These companies are usually small and young companies experiencing fast growth. Technology and e-commerce companies are two such examples. These companies are likely to register impressive sales and revenue in the long term. 

 

The purpose of growth investing is to grow your capital at a faster and higher rate than other categories of stocks.

 

Dividend Yield Investing

 

This equity investment strategy is about buying stocks of companies that offer regular payouts from their profits. This payout are usually in the form of dividends. The utility sector such as energy is popular among equity investors who prefer a dividend yield investing strategy. The purpose of dividend yield investing is to earn a regular income, especially during market turbulence. 

 

You can stick to any one of these strategies or combine them. However, irrespective of the strategy you choose, you must remember the five basic principles of equity investing: 

 

The equity investment strategy should align with your long-term financial goals and risk appetiteDo not follow herd mentality – conduct market research on your own or consult an investment advisorYou should always diversify your equity portfolio across different companies, sectors, and market capsReview the strategy at regular intervals and tweak it if necessary without losing focus on long-term growth.

 

A long-term equity investment strategy needs an in-depth understanding of the stock market and disciplined investing. This could be challenging if you are an amateur investor or even an experienced investor with a time crunch. Purnartha, a leading portfolio management, and investment advisory services firm can support you in the equity wealth creation journey. 

 

Purnartha evaluates your investment goals and risk profile before recommending a suitable equity strategy for you. It has strong research expertise and follows a proprietary quantitative model to determine the right equity stocks for long-term growth. 

 

Get in touch to know more.

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