Long-Term Investing Becoming Shorter in Global Economy

There is only one reason most investors buy a stock and that is because they expect a return that will be greater than putting the money in some form of savings account.

They are willing to take the risk that the stock will not do well in exchange for the potential and often future reward that the investment will yield a greater return than a safer investment.

The relationship between risk and reward has a direct bearing on what you should pay for a stock and what you should expect as a return.

How do you find stocks that will reward your investment over the long-term with consistently higher returns?

It would be wonderful if we could count on certain companies being industry leaders for the next 20 years.

Our Job

That would make our job as investors much easier. However, given the rapidly evolving nature of the global economy, it's probably not realistic to count of finding stocks you can buy and count on holding for decades.

We have to buy stocks today and make our best judgement about the companies that have the greatest growth potential and the most defensible market positions.

Using stocks screens, it is possible to find industry leaders with strong financial ratios.

Growth investors will be looking for emerging leaders - companies that are on a fast growth trajectory with products or services that extend their market share.

Value investors look for companies that have been mis-priced by the market, for reasons other than a flawed business concept, and look for a big payoff when the stock is correctly valued by investors.

Investing Strategies

Growth investing strategies create opportunities for wealth as long as the company continues to grow. At some point, many growth companies slow down and the market can be very harsh with the stock.

Some value companies are never truly appreciated by the market and investors are stuck with a stock that has not done much for them for a long time.

The point is you are not marrying a stock when you buy it - there is no, until death do us part.

If you are not earning a return that is significantly better than keeping your money in a relatively safe savings instrument, it's past time to move on.

Long term investing is only for those stocks that keep their end of the relationship, which is to provide you with an above-average return.