Devising a long term investment plan is a crucial element for wealth creation. It is like putting together a winning cricket team.
As you might know, a cricket team has different types of players. Batsmen, baller’s wicketkeeper and of course all-rounders. While every type of players are valuable in their own way, all-rounders are the most sought after players as they can do multiple things such as both batting and balling apart from fielding.
Similarly, it is very important to have a good stocks portfolio as a part of your long term investment plan.
Important points to consider while choosing good stocks for building a portfolio for a long term investment plan:
- Check the long term growth perspective of the company
- Check for companies with low or zero debt
- Check whether the company is well managed professionally
- Check for companies with good competitive advantage over peers
- Check for companies with scalability in operations
- Check for companies with huge and loyal fan base for its products/services
Now that you have discovered the important points to consider while choosing good stocks for long term investment plan, let’s take a look at the benefits of the same.
Income From Dividend, An Extra Benefit Of Long Term Investment Plan In Good Socks
Good stocks offer regular dividends to investors as a reward for investing in their business. This helps in generating a stable and passive income.
Good business usually are consistent in dividend payouts and do so even if the stock has lost value. The income that you earn in the form of stocks held in your portfolio as a part of your long term investment plan represents additional income on top of any profits that you will get when you eventually sell the stock. Dividend income can help you in fulfilling financial goals such as funding for retirement or even help you in investing more as you grow your investment portfolio over time.
Long Term Investment Plan In Good Stock Portfolio Can Help You Beat Inflation
Rising inflation eats away the real value of your investment in traditional saving instruments. Let’s take a small example of a long term investment plan made in a bank fixed deposit.
In case you have saved one lac rupees for a term of 1 year at an interest rate of 7% and the inflation rate is 5% then your real rate of return would be just 2% (7-5%). That is why long term investment plan in traditional savings instruments like bank deposits, PPPF, post office deposits are inadequate to beat inflation.
On the other hands when you make a long term investment plan in a good stock profile, your portfolio can generate superior returns in double digits over long term and beat inflation by a good margin.
Long Term Investment Plan In Good Stocks Are Proven To Be Safe Bets During Market Volatility
Stocks of well-established businesses with consistent earnings have proven to be safe bets during uncertain times in stock market. Such stocks are likely to fall less during market corrections and usually are the first to rally when the tide reverses.