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How to Be a Great Long-Term Stock Investor

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  • (0:45) - Buy and Hold Stock Strategy: The Power of Compounding
  • (6:50) - Tips To Manage Your Portfolio For The Long Term
  • (14:00) - What Type of Stocks Should You Be Buying?
  • (23:45) - Episode Roundup: AMZN, SBUX, FB, IBM, NVDA, PYPL, EL, NFLX


Welcome to Episode #286 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

This week she’s going solo to share her best tips on how to be a great long-term stock investor.

Have You Ever Owned a Stock for an Entire Year?

The average time for most stock investors to hold a stock is now about 5 ½ months, down from 18 months pre-pandemic.

That means for most investors, the thought of owning a stock for 5 or 10 years is very foreign. And investors will get out at even a hint of non-performance.

Amazon (AMZN - Free Report) soared in 2020 after the coronavirus sell-off, gaining 74% between Mar 9 and Nov 9. But in 2021, shares haven’t gone anywhere, adding only 3.4% for the year.

How many investors have stayed in the stock this year?

Are you considering selling because other stocks are performing better even though you consider yourself a long-term investor?

3 Tips for Long-Term Investors

1.       Don’t look at your portfolio every day. There’s no reason to see how much money you are making, or losing, every single day. This is short-term thinking. It will distract you from your long-term investing goals.

2.       Buy some stocks that pay dividends. We all like getting “free” money. If you get a stock that stagnates for a year or more, getting a dividend can help smooth over some of the pain. For example, Starbucks (SBUX - Free Report) stock went nowhere from 2016 to 2019. In those 3 years, it was up just 5.9% compared to the S&P 500 which gained 27%. However, it paid a dividend, which at that time was yielding around 3%. Not too shabby. It eased some of the pain until the stock finally broke out to new highs in the last 2 years.

3.       Dollar cost average on sell-offs. In 2018, Facebook (FB - Free Report) was hit with all those issues surrounding privacy concerns. From July 2018 to January 2019, shares fell 33%. It presented a buying opportunity for long-term investors to add more shares “on sale.”

Be diverse in your portfolio. Own at least 10 individual stocks because you likely won’t be able to pick all winners.

For example, Warren Buffett bet big on IBM (IBM - Free Report) a decade ago but then sold his position as it wasn’t performing as he hoped. From Sep 2011 to Sep 2021, IBM shares have actually declined 23% while the rest of the market was up big.

However, he owned plenty of other stocks that helped ease the pain of being in a stock that didn’t perform.

Additionally, you don’t need to buy in at the IPO to do well as a long-term investor.

While Netflix (NFLX - Free Report) shares are one of the best performers of the last 20 years, if you bought it in 2012, 10 years after its IPO, you would still be up 7300%.

What else should you know about how to be a great long-term investor?

Tune into this week’s podcast to find out.

[In full disclosure, Tracey owns shares of AMZN, SBUX, and FB in her personal portfolio.]

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