Those investing for long term profits tend to take a different view of the stock market than someone who trades stocks for short term rewards. The rationale behind long term investing is that historically the stock market in the USA has gone up over time. People use different measures but the fact is that over long periods of time well chosen stocks outperform bonds, bank accounts, and many other investments. There are, however, some specifics regarding this assessment. For example, a commonly used argument for investing for long term profits had to do with the Dow Jones Industrial Average, or DJIA. If one looked at the DJIA the day before the stock market crashed in 1929 and then checked in every year or so he would find that the DJIA caught up, even after the worst market crash of the century, and outperformed many other types of investments over the years. There are a couple of problems for both traders and investors in this argument. First, the composition of the DJIA changes over time. Stocks are added and stocks are taken out. Second, unless one is engaged in stock index trading he will not be buying every stock in the DJIA in the same proportion that each of the stock is represented in the average.
Successful investing for long term stock profits has to do with picking stocks. It has to do with understanding stocks and finding underpriced stocks with a good margin of safety and intrinsic stock value. For example, long term investors look for a low price to earnings ratio as an indication that a company is making money but that its strength has not yet been recognized by the market at large. The rationale for investing for long term profits with this method is that the investor seeks to choose stocks in companies that have and will develop strong products, bring them profitably to market, and effectively control their overhead along the way. By investing once in a steadily growing company the investor avoids paying fees and commissions on repeated trading and only concerns himself about when to sell stock when he needs money for other investments, retirement, college education, and the like.
2. Those investing for long term
profits tend to take a different view
of the stock market than someone
who trades stocks for short term
rewards. The rationale behind long
term investing is that historically
the stock market in the USA has
gone up over time.
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3. People use different measures but
the fact is that over long periods of
time well chosen stocks
outperform bonds, bank accounts,
and many other investments.
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4. There are, however, some specifics
regarding this assessment. For
example, a commonly used
argument for investing for long
term profits had to do with the
Dow Jones Industrial Average, or
DJIA.
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5. If one looked at the DJIA the day
before the stock market crashed in
1929 and then checked in every
year or so he would find that the
DJIA caught up, even after the
worst market crash of the century,
and outperformed many other
types of investments over the
years.
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6. There are a couple of problems for
both traders and investors in this
argument. First, the composition of
the DJIA changes over time. Stocks
are added and stocks are taken out.
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7. Second, unless one is engaged in
stock index trading he will not be
buying every stock in the DJIA in
the same proportion that each of
the stock is represented in the
average.
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8. Successful investing for long term
stock profits has to do with picking
stocks. It has to do with
understanding stocks and finding
underpriced stocks with a good
margin of safety and intrinsic stock
value.
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9. For example, long term investors
look for a low price to earnings
ratio as an indication that a
company is making money but that
its strength has not yet been
recognized by the market at large.
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10. The rationale for investing for long
term profits with this method is
that the investor seeks to choose
stocks in companies that have and
will develop strong products, bring
them profitably to market, and
effectively control their overhead
along the way.
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11. By investing once in a steadily
growing company the investor
avoids paying fees and
commissions on repeated trading
and only concerns himself about
when to sell stock when he needs
money for other investments,
retirement, college education, and
the like.
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12. An important thing to remember
about investing for long term
profits is that a long term
investment is only good so long as
it is profitable. Although the DJIA
rose over the last century despite
frequent setbacks, not all stock in
the original DJIA prospered.
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13. Because the investor, as well as the
day trader, typically deals with one
equity at a time, it is important to
follow each stock with
fundamental and technical analysis
in order to keep stock, buy stock,
or sell stock before the bottom falls
out.
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14. Using technical analysis tools such
as Candlestick chart formations,
investors can profitably anticipate
a turnaround of a falling stock
price and increase long term
profits buy buying at the bottom of
the price curve.
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15. Using Candlestick analysis the
investor can commonly anticipate
when rising stock prices will be
subject to market reversal as well
as continuing upward market
trends.
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16. What those strictly investing for
long term profits miss out on are
the profits to be obtained from
short term market volatility.
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17. With the use of technical analysis with
Candlestick pattern formations the
trader will profit from short selling,
buying calls, buying puts, and buying
penny stocks that have fallen out of
favor while the long term investor sits
on the sidelines, waiting for the
general strength of the market and the
economy to pull his stocks upward.
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