Long Term Investment


Long Term Investment By www.CandlestickForums.com A long term investment is typically thought
to be a stock, bond, or other equity held longer than five years. For income tax purposes
a long term investment is one that is held for a year or more and is commonly subject
to a different, and lower, tax rate than an investment held for less than a year. Good long term investment stocks will typically
have a strong cash flow combined with reasonable stock prices. Investors use the price to earnings
ratio as a guide to whether or not stocks have been priced above their intrinsic stock
value. If the market has driven a stock price too
high its forward looking earnings will not be sufficient to justify its current price.
Investors also look for a margin of safety in a long term investment. For example, a
company with money in the bank, a low debt to asset ratio, and salable assets will be
able to weather stock market crashes when other companies will go bankrupt. If such stocks are well paying dividend stocks
as well, they will provide a good return on investment in quarterly dividend checks and
appreciation of stock value over the years. In long term investing as well as day trading
the use of technical analysis tools such as Candlestick pattern formations allows both
investors as well as day traders to anticipate market trends and market reversal in buying
stock and selling stock at optimal prices. A long term investment stock portfolio is
normally diversified. Diversifying a stock portfolio protects the investor against localized
problems in individual market sectors. The stock investing strategy of diversification
can also protect the value of a stock portfolio during an economic down turn. This is because
certain stocks will commonly go up in price when the rest go down in price. For example, companies selling basic consumer
goods such as toothpaste and dish soap keep selling their products during a recession
at the same time that families are putting off the purchase of a new car and not flying
across the country for their vacation. Thus companies such as Colgate, Clorox, and
Proctor & Gamble tend to see their stock prices survive or even go up as others fall in the
early stages of a recession. When the investor consults Candlestick chart formations at the
beginning of an economic downturn, he will commonly see certain stocks ready to fall
and others remaining stable. Using Candlestick analysis the long term investor
will commonly watch the fall of stock prices. Buying at the bottom he will profit from picking
stocks that were previously overpriced but are now good for long term investment. The successful long term investor wants to
hold stocks forever. However, a long term investment is only good so long as it is profitable.
The smart long term investor will routinely do both fundamental and technical analysis
of his stocks. When the fundamentals show that a stock no
longer holds long term promise it is time to consult a visual and easy to read stock
analysis system such as Candlestick chart analysis in order to sell stock at the best
available prices and move on to a different long term investment.

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