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Tips for Profitable Long-Term Investing in the Stock Market

Profitable long-term investing is doable, even if you don't know much about stocks. These tips will help you make the most of your money.

By Riley Raul ReesePublished 6 years ago 5 min read

Learning how to invest in the stock market is something that everyone should do. Studies have shown that investing your money in stocks is the easiest way to make money grow—assuming that you know what you're doing.

That being said, not investing in the stock market can prove to be a serious financial mistake for both your current net worth and your ability to fund your retirement. Long-term investing is a smart move that's been backed by Warren Buffett, George Soros, and other billionaire stock owners.

If you want to enjoy profitable long-term investing, but don't know where to start, why not give these classic tips a try?

The biggest issue that once barred the masses from profitable long-term investing was price. It used to be that you would need hundreds, or even thousands, of dollars to start investing in the stock market. These days, that's not the case.

A lot of the best apps for investing beginners are focused on helping people who would have thought themselves too broke or too uneducated about stocks to invest. They do this by creating apps that take your spare change, then invest it in a mutual fund that's professionally managed.

This "set and forget" method has low fees and doesn't put you into too much risk. Many apps, including Stash, Motif, and Acorns, offer this kind of long-term investing and can keep up with regular market performance.

Don't check your portfolio every day.

Most beginner investors tend to think that daily checks will help them make more profitable long-term investing decisions, but it won't. In many cases, regular checkups actually make it harder to see the forest for the trees.

When you get too focused on daily trends, it's easy to find yourself selling at a loss due to a blind panic. By checking your portfolio once a week rather than once a day, you'll lose a lot of the urgency, and therefore help reduce bad investing habits.

The easiest way to ensure profitable long-term investing decisions is to choose funds. Index funds and Exchange Trade Funds allow you to have a more diverse portfolio by letting you buy fractions of shares that are bundled together in one share.

A lot of popular stock trading apps will allow you to trade index funds and ETFs at low cost to you. Stash, for example, even has its own set of ETFs users can buy into, and coaches users to keep their investments for years rather than offer short-term investments.

For example, most of the best S&P 500 index funds regularly outearn the indexes they're based on. As a result, it's a great way to get profits without the fuss.

Learn when to cut your losses, and when to sell your winners.

The biggest reason why a lot of people end up losing money in long-term investing is because they don't know when to cut their losses. Recognizing when a stock is losing too much money is important, but only if you act on it.

If a stock has not been performing well, it's okay to sell it at a loss so that it won't continue to hurt your profits. On the other hand, being too greedy with winning stocks isn't wise, either. A lot of experts suggest selling winning stocks after you see a rapid 20 to 25 percent gain.

This allows you to get some profitability without potentially missing the spike. Most stocks undergoing rapid gains tend to correct themselves quickly. As a result, selling at a 25 percent gain allows you to short the stock and turn a profit.

That being said, Peter Lynch, who wrote one of the best books on investing ever made, is known for his "tenbagger" policy which made his portfolio get tenfold profits off certain picks. So, it's up to you to figure out what you want to do long-term.

One of the most profitable long-term investing choices you can make involves setting up your own Roth IRA or putting money into your company-sponsored 401(k) programs. These are investment options that allow you to have tax benefits later on.

Starting your own retirement fund shouldn't be that hard. In fact, apps are being made for that very reason. Finhabits, for example, allows you to make your own Roth IRA using an easy phone app.

Don't listen to "hot tips" until you do your own research.

We all have heard about investors who have followed "hot tips" that turned out to be bunk. Heck, we may have even just accepted hot tips as fact, simply because our brokers told us they'd boom or because some guy wearing a money suit on TV said it.

Due diligence is often what makes profitable long-term investing worth your time, especially if you're buying stocks individually. Take a look at each company for yourself before you put down money on them.

Penny stocks are regularly called one of the most dangerous investments you can make on the stock market. The reason they can be so profitable is because they are very cheap and can quickly increase in value to several times their initial asking fee.

The problems with penny stocks, though, make them bad options for long-term investing. Many penny stocks end up folding within months of creation. A lack of oversight also means that these stocks could easily be fronts for scammers.

Needless to say, it's better to get an app (like Stockpile) that allows you to buy fractional shares of big companies than it is to have a bunch of penny stocks. Long-term, blue chips will likely yield better profits than that one penny stock you want.

Choose a stock trading strategy and just stick with it.

A lot of people who want to do profitable long-term investing pick a trading strategy and change it halfway through their investment plan. This ends up costing them money—not to mention time.

Switching gears so frequently makes it hard to figure out what's actually working and what's just luck. A better way to get more money from your trading is to choose a strategy and stick with it.

We all know that blue-chip stocks are the "tried and true" stocks out there. Most of the time, blue-chip stocks are a great road to profitable long-term investing. However, there are plenty of other stocks out there that you might want to learn about.

Don't be afraid to go on a stock app like Robinhood and browse lesser-known stocks. You might find one that makes a lot more sense, and could be the "tenbagger" in your portfolio.

Lastly, consider getting dividend-rich stocks or DRIPs.

One of the fastest routes to profitable long-term investing is through dividend payoffs. Dividends are like small cash gifts from the companies that you invest in, and they can add up faster than you'd believe.

DRIPs, or Dividend Re-Investment Plans, allow you to automatically re-invest all the dividends you get from the stocks you invest in. This adds more fuel to your stock portfolio fire, and therefore can help you earn more money, faster.


About the Creator

Riley Raul Reese

Riley Reese is comic book fanatic who loves anything that has to do with science-fiction, anime, action movies, and Monster Energy drink.

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    Riley Raul ReeseWritten by Riley Raul Reese

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