Very few people buy and sell stocks as a way of making quick money. Instead, most investment strategies plan things out over long periods. The aim is to ride out any losses along the road and cash out for a large profit when the time is right. This is why patience and resilience are some of the best virtues of long-term investors.
Investments, especially in the stock market, usually trend upward over time. Although, at times the stock market can be volatile, with daily and weekly dips and climbs. However, as stated these peaks and valleys normally still show a gradual upward climb over time. Valleys have been more common since the pandemic causing somewhat of a bear market in 2022. However, that is not always a bad thing for long-term investors.
Ups and down are also the same in the housing market. Currently, UK house prices are up 12.8% from the previous year. However, there is speculation that the housing market will stall and perhaps even crash at the end of 2022. Despite these highs and lows, brick-and-mortar investments are some of the safest and most lucrative over the long term.
This article will explore in detail the best long terms investments to make including long-term stocks.
Growth stocks
Growth stocks can be some of the best stocks to buy. Growth stocks are stocks that are expected to continue to rise exponentially at a much higher rate than the average market growth. These types of companies have aggressive expansion strategies and an ethos of dominance. To achieve this, these companies heavily re-invest in the business and expand their franchises.
An example of a high-growth company is Nike, and long-term investors like Warren Buffet have included them in their investment portfolios. Nike is one of the most well-known and successful brands in the world, and it is hard to see how the company can fail. Although the company does sponsor some of the world’s leading sports athletes it hardly needs to pay celebrities to wear its products. So entwined in sport and culture, many celebs will willingly wear Nike without having to be endorsed by them.
This includes 50 cent who wears Nike trainers despite previously having his own $80 million G-Unit sneaker deal in collaboration with Reebok. 50 cent is notorious for starting his own brands and promoting them heavily, but he does not seem to mind wearing Nike for free.
Interestingly enough, buying special edition Nike trainers is an investment in itself as their value accrues over time. However, Nike’s sponsorship and marketing campaigns – especially their social justice initiatives have sometimes backfired dramatically. For example, they lost $3.75 billion in market cap after they announced Colin Kaepernick as the new face of “Just Do It”. In 2021 their stock price dropped by 4.7% after much of the Chinese population began to boycott the company after they refused to buy cotton from Xinjiang, citing human rights concerns.
However, spread over time, Nike seems to be on a continual upward curve and is already recovering from a large drop in value. It also gives the opportunity for long-term investors to buy the dip.
Stock funds
If you are unfamiliar or uncomfortable with investing yourself, you can also utilise the expertise of investment professionals. When you invest in a stock fund, investment managers will make each investment decision for you. They will have in place an investing strategy to try and make as much money as possible on your behalf.
Stock funds usually focus and invest in one specific area such as in FTSE 100 companies. Investments can be made for as little as £25 a month and spread the risk between numerous stocks. This is because a stock fund will be made up of a diverse portfolio of investments.
Bond funds
Admittedly the main purpose of buying bond funds is to achieve an immediate passive income. However, over the long term if you build a strong enough portfolio of bond funds you may earn enough each month passively to stop working.
Investing in bond funds involves investing in the debt or bonds of a government or company. Treasury bonds are good stocks to buy as they are relatively safe with a steady flow of earnings growth. The government promises to pay back your investment with added interest. When a government needs excess funds to pay for the military, road infrastructure, public work and other endeavours they get the money from investors.
However, it is important to note that returns on investment are lower than can be expected in the stock market. However, bond funds are a lifeline when other stocks fail. They give you steady returns that you can rely on. You can then choose to save these returns or make further investments in other stocks.
Dividend stocks
Dividend stocks are good stocks to buy as they actively provide payments to you, as well as potentially become valuable stock to sell for profit. This is because when buying stocks with dividends, the company has agreed to give investors a small percentage of their earnings. This is known as a dividend yield and is typically paid quarterly. Dividend stocks tend to have a yield of around 2-5%
In some cases, a company will continue to pay dividends even if they have made a loss to maintain its reputation for future investors. This means that even if there is a dip in the stock price you still receive short-term returns whilst losing. Then, in the long term, the company could possibly bounce back and you could sell shares for a profit as well.
Value Stocks
Value stocks are often what separate the outliers of the investment world from sensible, tried and tested methods of steady growth. Value stocks are low-value stocks that are perhaps not yet fulfilling their potential. For this reason, they are highly undervalued.
This is when wizards of the investment world make a name for themselves. For example, if they see that a product or company provides a service that is not yet majorly utilised but in years to come will become massive, they will buy up these undervalued stocks. Then in the long term, when the product or company explodes in value they reap massive rewards.
This was even a move used by one of the greatest basketball players of all time Shaq O’neal. After being quoted $80,000 for home surveillance cameras by a security company he instead decided to go to Best Buy. He instead bought and set up a cheap doorbell camera. Then seeing the huge potential of the company, which was extremely undervalued, he invested heavily in the company. That camera company was Ring, which was later sold to Amazon for $1 billion.
This shows just how massively undervalued stocks can grow. It also shows that although experts are adept at spotting these trends and gaps in the market you do not have to be one. If you keep your eyes open for opportunities and research current trends, keep up to date with stock market news, and emerging businesses, you may be able to invest cheaply in the stock market with huge long-term returns. Also, it is good to diversify your portfolio with a number of value stocks, knowing some may fail but others may more than make up for it.
Real Estate
Long-term stocks are not the only way to make long-term money. Another way to make long-term gains is to invest in real estate. Property has enormous growth potential as property prices have a continuous growth rate over time. Despite large dips property prices, in general, have always recovered and increased over a long period. The shrewdest investors buy during a housing market crash knowing this. They then hold onto the property and sell it for a huge profit when it recovers.
Moreover, purchasing real estate can provide an additional cash flow. For example, if you rent out the property you receive a weekly, monthly, or yearly income from it. If the property is purchased using a mortgage, this rent can effectively be used to pay off the mortgage for free.
ISA investment
Another almost risk-free way to invest in the UK is to earn from savings interest. You could put your money in an Individual Savings Account. As the law stipulates in the UK, you can place up to £20,000 into an ISA, and any earnings you make are tax-free. So, if you earn a wage which has you bordering two tax brackets, you can invest this way without having to jump into a new tax bracket.
Also because interest rates are currently growing, ISA earnings have increased. You can invest in a cash ISA and receive a small earnings growth from interest or invest in a stock and shares ISA. If you are not knowledgeable in stock investing this is another way to break into the market by having an expert make investments investment decisions for you.
What are the best long-term commodities to invest in?
There are a number of key commodities that people can invest in for long-term success. The past performance of these types of products shows a pattern of success over long periods. Gold is rightly named the gold standard in commodities. It is especially valuable to have during a cost-of-living crisis like the one currently happening in the UK. Gold has historically risen in value during these times.
Gold does not have any intrinsic value other than that humanity has agreed it is valuable. However, there is an increasing demand for gold as it is enshrined in many cultures. For example, gold is of great cultural importance in the two largest populations in the world – India and China
Crude oil is another commodity to invest in. However, this is one of the most volatile commodities as the stock price can fluctuate greatly in line with demand. In 2021 oil prices rose by 55%. Also, emerging markets in the energy sector like natural gas rose by 47%. Moreover, despite the demand for greener energy coal prices rose by 161%.
Many investors also buy stocks in steel. Steel is an essential material, and is virtually impossible to go a day without seeing. In particular, steel is essential in construction and vehicle production which makes it highly valuable.
The best long-term investments: Summary
Most times when investing it is better to play the long game, waiting out any peaks and valleys to smooth out into a nice profit. However, some long-term stocks are better than others. High growth stocks for example have a near continuous upward trajectory as they are committed to reinvesting and growing the company. If you are lucky you may be able to buy high-growth stocks during a dip. This may be caused by a temporary boycott as seen by Nike.
Financial markets can often be tricky to navigate which is why many enlist the help of a corporate finance specialist by investing in stock funds. They will invest in a portfolio of stocks on your behalf. Also, few stocks are as stable as bond funds. You can buy the debt or bonds of a government or company and they agree to pay you back with interest.
Dividend stocks are some of the best long-term stocks because they accrue value and pay you a percentage of their profits as well. This percentage is known as the dividend yield. Value stocks are some of the best long-term stocks as well. These are stocks much lower than their potential. The plan is to buy these long-term stocks, hold on to them and hope they achieve their full potential.
Although not long-term stocks, purchasing real estate is a great long-term investment. Buying property leaves you well positioned as it gives you an asset that will likely increase in value over time and an income if you rent it out. Investing in an ISA is also not a long-term stock but is a great investment from a long-term perspective. This is because as long as you do not put more than £20,000 into it your earnings are tax-free. So your combined net income will not push you into a higher tax bracket.
Investment advice by Capital Via has listed the five best long-term investment commodities. These are:
- Gold
- Oil
- Natural Gas
- Coffee
- Steel