4 Tips For Choosing A Stock As A Long-Term Investment

Posted on: 15 August 2017

Buying stock is often a very wise investment. But as you listen to analysts and view stock buying signal charts, it can become confusing to determine which stocks to buy if you are not a financial professional or very experienced in buying stocks. For new investors in the stock market, the best bet is to look for stock that are good long-term investments. Some signs that a particular stock is a good buy for a long-term investment include:

Understand How the Company Makes Money

One of the keys for buying a long-term stock is understanding the company that you're buying into and how they make their money. Many new investors make the mistake of buying stock in companies that they know nothing about, which can be a mistake in the long run. If you're planning on purchasing stock, make sure you know exactly what a company does and what their major costs are.

Good Returns on Capital without Leverage

Ideally, you should choose to buy stock in a company that produces consistently good returns on capital without the leverage involved in borrowing money for business expenses. The best long-term stock investments are in companies that always turn a profit and are at the point where they are not relying on outside sources for any type of funding. 

Shareholders' Interests are Put First

When it comes to buying stock in a company, you should always look for a company that has a history of putting their shareholders' interests first. This will give you the peace of mind of knowing that you're investing in a company that will work hard to grow the business and keeps their shareholders from selling off the stock that they own at a low price.

Competitive Advantage

There are many industries where a product or service usually doesn't have a competitive advantage. For example, most people don't pay attention to where the apples they buy come from, nor are most people worried about the brand of nail they buy at the hardware store. On the other hand, people can be very brand-loyal when buying things like cell phones, tooth paste, and their favorite soda.

When deciding what stock to purchase and hold onto for the long-term, look for a company whose products or services have very loyal customers. The competitive advantage of brand-loyalty will help ensure that the company will continue to grow and the value of your stock will keep going up. 

Contact a company like TBSP Inc. for more information and assistance.