What is long-term investing?
Long-term investing is the process of buying and holding investment securities you believe will compound investor wealth indefinitely into the future.
This guide covers why and how long-term investing works so well to compound your wealth over time. You will benefit from:
– 4 step long-term investing strategy
– The best industries for long-term investing
– 7 long-term investing quotes from some of the world’s best investors
– 6 tips to invest for the long run
– 8 High quality dividend stocks to hold for the long-run
“Long-term investing is about character, about depth of vision and the cultivation of patience, about who you are and who you’ve made yourself to be”
Lowell Miller, The Single Best Investment, page 149
3 Compelling Reasons to Become a Long-Term Investor
There are 3 good reasons to become a long-term investor:
1. It reduces fees
2. It requires less of your time
3. It is highly effective
Every time you buy or sell a stock you incur transaction costs. Buying and holding indefinitely reduces fees.
This is especially important in taxable accounts. When you hold a stock that has capital gains you are in effect allowing the portion of those gains you owe to the government to continue to compound in your investment.
The compounding of money that would’ve been paid out as capital gains tax has a powerful effect on your investments over time.
Time is money. The purpose of life is not to manage your investments…
Long-term investing requires less of your time. Your work is done when you buy a high quality stock you believe will maintain its competitive advantage indefinitely.
All you have to do is periodically check in on the company to make sure it is performing reasonably well.
How often do you need to check in? Quarterly is more than enough.
You don’t have to find other quality investments tomorrow, next week, or even next year… The money you’ve invested is safely compounding away.
Long-term investing is successful because of its beneficial psychological ramifications. If you invest for the long-term you will focus on businesses with strong and durable competitive advantages.
Dividend paying businesses with strong competitive advantages have historically outperformed the market over time.
The Dividend Aristocrats List has generates annualized total returns of 10.45% a year over the last decade. The S&P 500 has generated annualized total returns of 7.01% over the same time period.
Source: S&P 500 Dividend Aristocrats Fact Sheet
Note: The Dividend Aristocrats are stocks in the S&P 500 that have increased their dividend payments for 25+ consecutive years. A company must have a strong and durable competitive advantage to accomplish this feat.
