The Safest Way to Invest Money Involves Focusing on High Investment Quality

For investors interested in long-term investing, our TSINetwork Ratings are a key part of the safest way to invest money

The safest way in our view for Successful Investors to invest money is to place a lot of importance on investment quality.

We assign one of our six TSINetwork Ratings to stocks we recommend. We base these six ratings on nine key factors. Many of the factors are widely recognized as investment quality hallmarks such as a long-term record of earnings and a long-term record of dividends. Others are less widely followed, such as a company’s ability to profit from secular trends.

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The safest way to invest money: Use our TSINetwork Ratings:

  • Long-term record of profit;
  • Long-term record of dividends;
  • Industry prominence—or better still, industry dominance;
  • An attractive balance sheet, with adequate equity and working capital, and manageable debt;
  • Nationwide operations, or even better, multinational operations;
  • Able to serve all shareholders’ needs. The best stocks in this category must be free of excess government regulation, free of too much dependence on a single supplier, and free of insider abuses;
  • Freedom from business cycles;
  • The ability to profit from a secular trend, or two points for the ability to profit from two or more secular trends. Secular trends (such as the global move toward economic liberty and free trade) go far beyond mere business cycles; they reflect ongoing changes in society;
  • Offering products or services that profit from habitual behaviour.

The safest way to invest money: Look for secular trends to profit from

Secular trends go far beyond mere business cycles. They reflect ongoing changes in the world. One key secular trend today is the fact that vast numbers of workers in emerging markets are pole-vaulting into the middle class. This opens up great opportunities for many of our recommendations in the consumer area. Companies can take the products and procedures they developed and perfected in the west, and put them to work in China, India and other emerging markets, with little additional development cost.

For instance, fertilizer companies can also profit from this secular trend. When poor people begin making more money, one of the first things they do is improve their diet. They want more and better food—and more meat in particular. This pattern will fuel growth in the fertilizer business for years if not decades to come.

The safest way to invest money: Have a plan

Safer investing also means taking a careful and methodical approach to investing which does not jeopardize your savings or your investment goals. There will always be some inherent risk when investing, so making safer investing decisions lets you minimize that risk.

One way that new investors can make safer investing decisions is to stop basing decisions to buy or sell a stock on past stock-price performance alone. Rising and falling trends come in many shapes and sizes, depending on what’s going on in a company, its industry, and the world. But in the end, a stock never gets so high that it can’t keep rising, or so low that it can’t keep falling.

Safer investors are those who think about their investing from a long-term point of view. Safer investing means not overreacting to short term market corrections and downturns.

The safest way to invest money: Don’t try to time the market

In our view, your goal as an investor, particularly if you follow a conservative investing strategy like the one we recommend at the Successful Investor, is to make an attractive return on your investments over a period of years or decades. Failure means making bad investments that leave you with only small profits or even losses.

Unsuccessful investors can still make some profits. They just don’t make enough to offset the inevitable losses and leave themselves with an attractive return.

One example would be attempting to time the market. On occasion, you may succeed in selling just prior to a major downturn, and buying back at much lower prices. More often, prices will soon hit bottom and move up to new highs. If you buy back, you’ll pay higher prices. If you had followed this strategy with Canadian bank stocks, for example, you could have missed out on some big gains over the years.

In hindsight, market downturns are easy to spot. Spotting them ahead of time is much harder, and impossible to do consistently. After all, if you could consistently spot market downturns ahead of time, you could acquire a large proportion of all the money in the world, and nobody ever does that.

The problem is that you’ll foresee a lot of market downturns that never occur. All too often, the market-downturn clouds disperse soon after skittish investors have sold. Good reasons to sell do crop up from time to time, of course, even if you follow a long-term conservative Successful Investor approach. But “You’re never go broke taking a profit” is not one of them.

What kind of investing strategy do you use to safeguard your investments?

What would you suggest as a safe way to invest with an eye toward long-term growth?


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