One of the best ways to secure your financial future is to invest, and the best way to spend is in long term investments.
While many people think of investing as an attempt to get a short term stock market score, it is a long term investment where ordinary investors can build wealth. By thinking and investing in the long term, you can achieve your financial goals and increase your financial guarantee.
Investors today have many ways to invest their money and can choose the level of risk that they are willing to take to meet their needs. You can select very safe options such as a Certificate of Deposit (CD) or take a risk – and make potential profits! – with investments such as stocks and mutual funds or ETFs.
What To Consider
While long-term investments can be a way to a secure future, you will want to understand the importance of risk and the length of time in achieving your financial dreams.
When investing in getting a higher return, you usually have to take a higher risk. Therefore, very safe investments such as CDs, tend to have low yields, while medium risk assets, such as bonds, have slightly higher returns, and high-risk stocks have even higher returns.
While stocks generally have a good reputation, they are known for their volatility. It’s not unusual for stocks to rise or fall by 50 percent within one year.
Will you be able to withstand a higher level of risk to get higher returns? It is essential to know if you can face the risk or if you will panic when your investment falls.
At all costs, you want to avoid selling your investment when it falls if it still has growth potential. It can be demoralizing to sell your investment, only to watch it continue to grow even higher.
One of the ways you can reduce the risk is by committing to keep your investment longer. A longer holding period gives you more time to break away from the ups and downs of the market.
Therefore, investors who invest in the market should be able to keep their money there for at least three to five years. The longer, the better.
When you invest for an extended period, do not spend all your time watching your investments and worrying about short-term movements. You can set up a long-term plan and then put it (mainly) on autopilot.
You might be interested: The Best Tech Stocks to Buy in 2020
5 Best Stocks for Novice Investors
Let’s start with the five that are particularly good for beginner investors due to their strong balance sheet, positive free cash flow, and competitive advantages:
FAANG shares (Facebook, Amazon, Apple, Netflix, and Google)
The first three are all FAANG shares (Facebook, Amazon, Apple, Netflix, and Google). These massive technology companies have their fingers in every pie and can destroy parts of the economy that they do not have.
Their large market capitalizations reflect the fact that the market knows this too. However, novice investors tend to be better off holding on to well-known large stocks with keen brand awareness when they start their investment journey, rather than being too helpful to smaller branded stocks.
Amazon dominates online retailing at the rate of about half of all American e-commerce! If this doesn’t surprise you, how about estimating that over 100 million Americans are now paying $119 a year to become members of Amazon Prime.
That’s not even where it gets most of its profits. Most of it comes from Amazon Web Services, its cloud computing offerings. While its retail segment sells us actual picks and shovels, Amazon Web Services sells virtual picks and shovels online.
Alphabet (also the owner of Google) is equally impressive. Its search engine is better described as “monetary.” This is what happens when the market share worldwide is about 90%.
Besides, YouTube is the number one video platform in the world, while Android is the number one mobile operating system.
Inside the alphabet umbrella is also a whole bunch of futuristic lunar shots and other “alpha stands” (get it?).
As a result, Google is involved in everything from waterless machines to virtual reality, and from drones to artificial intelligence (AI).
It is rounding out Facebook’s FAANG, the line of social networking sites with Instagram and WhatsApp, in addition to the famous Facebook and Facebook Messenger platforms.
Each of these four platforms has at least one billion users per month. It’s quite impressive when the world’s population is also in the unambiguous billions.
4 Best Dividend Stocks
Dividend shares make sense for many types of investors, not just for those looking for regular income or DRIP investing. After all, many long-term studies have shown that dividend payers have outperformed those who have not paid dividends.
Let’s look at four attractive candidates for the market today. Each of them shows a dividend yield that is approximately two to three times higher than the current S&P 500 dividend yield of 2%.
- AT&T – 6.5% forward annual dividend yield
- Verizon Communications — 4.1%
- Ford Motor Company — 6.7%
- General Motors Company — 4%
AT&T and Verizon
The first two shares, AT&T and Verizon, together dominate the US telecommunications market, both wireless and fixed.
As our data, telecommunications, and media continue to grow, these two companies are ready to make a profit. Fashionable words like “Internet of Things,” 5G networks, and cloud computing all provide opportunities for these two companies.
Ford and GM
The other pair to consider is Ford and GM. They play in a car space that was capital-intensive and competitive before the rise of electric, hybrid, and self-propelled cars, as well as driving services.
Now the competition includes not only traditional car manufacturers but also upstarts such as Tesla, Uber, and Lyft, as well as many foreign competitors with the same ideas.
The reason why Ford and GM are interested in additional research is that the market also sees the pricing of each of them in a single P/E ratio, resulting in higher dividends. Of course, this counts for nothing in the long run, unless you buy their strategies and plans for the future.
5 of the Best Growth Stocks
In contrast to dividend shares, growth shares often return little (or no) of their profits to investors as dividends. Many of them are in the pre-profit phase or have such small advantages that their P/E ratio is stratospheric. And if they do have profit, they tend to return it to their business.
- Sunnova Energy
Dropbox is one of many companies that use the cloud to make money. In particular, DBX provides storage in the cloud.
Instead of, say, covering the hardware costs required to store vast amounts of data, they pay Dropbox a small, regular fee to store data on their servers.
The last quarter of Dropbox shows why it should be considered one of the most promising technology inventories. The company’s revenue growth of 19% year by year was better than the previous quarter, where it was 18%.
The number of users in the third quarter was 14 million, better than FactSet’s consensus estimate of 13.89 million. Dropbox also puts pressure on these users – each user paid an average of $123.15, which is 4% better than a year ago, and higher than FactSet forecasts of $122.30.
It is expected that in 2020 Dropbox will provide growth in sales by 15%, which, according to analysts, will lead to an increase in profits by 22.9%. Despite these expectations, DBX shares are a relative value in their space, said Bank of America analyst Justin Post.
PayPal payment provider can see an acceleration in the growth of its revenues not only in 2020 but also in 2021, an average of more than 15%. An increasing number of consumers and vendors, including those outside the US, are using PayPal as a payment provider; almost half of the company’s revenue goes to the international market.
PayPal recently became the first foreign company to be licensed to provide online payment services in China after it acquired a 70% stake in Guofubao (GoPay), a Chinese online payment company.
That’s a coup, given that China is the largest e-commerce market in the world, and online sales are expected to reach nearly $2 trillion in 2019, Kuyper said.
PayPal will continue to grow as more and more users switch to mobile phones. Kuiper sees Venmo, PayPal’s mobile payments service, “continues to grow at a rate of 50% to 60% year-on-year in 2020, we estimate”.
Adobe is one of those companies that have gone from selling software in packaged boxes to consumers who can use the software for five years or more, to shipping software such as Photoshop and InDesign through the cloud annual subscription basis.
The company’s fourth-quarter results were “solid.” Revenue grew 21 percent year to year to $2.99 billion thanks to the strength of its product line, customer size, and geographic characteristics.
Analysts remain more “bullish” than not on the stock market, with 18 “Buy” or “Better” recommendations compared to 11 Holdings. Overall, they expect revenue to grow by 17.9% next year and profit to jump by 24.6%.
Salesforce.com, a cloud-based customer relations management software company, is one of the first cloud-based companies. The Customer Relationship Management (CRM) specialist has increased its revenue by approximately 20 percent annually over the past five years.
Wall Street expects 28 percent growth in revenue 2020 for Salesforce, which ends on January 31st, 2020, and another 23 percent in revenue for 2021, which begins on February 1st.
Third-quarter sales grew 33 percent year to year, and it has been said the company has demonstrated strength in all spheres over the quarter, particularly from a platform that includes both Tableau and MuleSoft.
Sunnova Energy is a Houston-based solar panel and battery company that was founded seven years ago and entered the market in July 2019. It operates in 20 states in the US and has 72,600 customers as of September 30th, 2019, an increase of 15,600 over the same period in 2018.
The news coverage was unanimously positive: seven analysts offered investors to buy NOVA shares. For example, BofA/Merrill analyst Julien Dumoulin-Smith initiated the buy-in August with a price target of $15, citing a stiff overall macro-economic tail and seeing growth potential beyond existing assets.
It is important to note that Sunnova Energy is positioning itself in a rapidly growing market. Roth Capital believes that the residential solar energy market will increase by 25% in 2020, giving NOVA great opportunities.
A long-term investment is one of the best ways to create wealth. However, the first step is to learn to think long term and avoid obsessively following the markets with its daily ups and downs.
If you want to start investing in long term investments, check out Bankrate’s review of top online brokers for beginners.
If you are ready to start, you can also practice on the best stocks under $1. However, please note that such cheap stocks may bring higher risks. But this is the best place to start before you dive into serious business with the major ones described above.