Here are some key stock tips for long-term investment growth and returns

Use these stock tips for long-term investment success and you will be on the path to higher portfolio returns with less risk

The core of our long-term investing approach is identifying well-financed companies that are established in their businesses and have a history of earnings and dividends. These 3 success factors mean they are more likely to survive any economic setback that comes along, and thrive anew when prosperity returns, as it inevitably does.

Here are some of our most important stock tips for long-term investment success:

Taking advantage of compounding is one of our first stock tips for long-term investment success

Compounding adds to the value of a sound and successful long-term investment decision. Compounding is what makes investing a worthwhile pursuit.

Compound interest is earning interest on interest. Over time, your long-term investments will earn more and more money from the effects of compound interest.

Note, though, that the magic of compounding can also be applied to dividends from stocks—not just fixed-return, interest-paying investments like bonds. When you earn a return on past investment returns, the value of your investment can multiply. Instead of rising at a steady rate, the number of dollars in your portfolio will grow at an accelerating rate. The compounding effect can be heightened when investors reinvest dividends.

Stock tips for long-term investment success: Hidden assets are a strong indicator of a company’s future prospects

Hidden assets are valuable assets that many investors overlook, discount or disregard altogether. They have special appeal for companies that are using takeovers of other firms to grow.

Hidden assets can be found in a company’s real estate and in their research and elsewhere. A hidden asset can also come from the strength of existing brand names that help launch new products. They can even grow out of obstacles to entry for  new competitors coming into a market.

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If you buy a stock for its hidden assets, those assets may stay hidden or ignored by investors— or turn out to be less valuable than you thought—but it can’t hurt you much. By definition, a stock’s hidden assets have not had much impact on its price so far. If you paid little if anything for the assets, you have little to lose. But the best hidden assets will eventually expand a company’s profits, grab investor attention, and push up its stock price.

Stock tips for long-term investment success: Consider both value stocks and growth stocks for your portfolio

If you balance and diversify your portfolio as we recommend, it should include both growth and value selections. In both areas, however, you should avoid extremes.

We’ll look at just value stocks here (for more information on growth stocks click here – growth stocks link)

When you look for stocks that are undervalued, it’s best to focus on shares of quality companies that have a consistent history of sales and earnings, as well as a strong hold on a growing clientele.

High-quality value stocks like these are difficult to find, even when the markets are down. But when you know what stocks to look for, you can discover them. Here are three of the financial ratios we use to spot them:

  • Price-to-earnings ratios
  • Price-to-sales ratios
  • Price-to-cash flow ratios

Stock tips for long-term investment success: Avoid loading up on aggressive stock picks

If an aggressive stock seems to check out reasonably well, you may want to take a chance and add the stock to your portfolio.

But even if you do invest in an aggressive stock, it’s best to keep it to only a small part of your portfolio. As well, it’s also a good idea to fit it into a portfolio well-diversified across most if not all of the five main economic sectors. That’s especially so if the aggressive stock is in either of the two most volatile sectors, Manufacturing & Industry, or Resources & Commodities.

After that, you need to monitor the stock much more closely than your other holdings, because of the more speculative nature of your investment. You’ll need to make a lot of difficult sell-or-hold decisions as the stock’s fortunes wax and wane. If it rises faster than your other holdings, you’ll need to decide if you’ll sell some from time to time or if you’ll let it represent an ever-growing portion of your portfolio.

Use our three-part Successful Investor approach along with our other stock tips for long-term investment success

  1. Hold mostly high-quality, dividend-paying stocks.
  2. Spread your money out across most if not all of the five main economic sectors: Manufacturing & Industry, Resources & Commodities, Consumer, Finance and Utilities.
  3. Downplay or stay out of stocks in the broker/media limelight.

What strategies do you focus on for long-term portfolio growth?

Do you feel like there’s more opportunity in short-term investments or do you prefer to focus on long-term growth?


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