How long is a long term investment? 3, 5, 7, 10, 20, 30, 40 years? Every time I ask a friend the answer varies from 3 to 40 years. Then I would ask, how long do you want your marriage or relationship to last? All would reply Forever of course! If one person can keep an investment FOREVER, he or she will be rich and happy. Providing nothing tragic happens of course…..
Long term investment is not a simple game of quick growth get rich scheme. None of us can read the futures and determine the exact cost of a company price in the next 5, 10, 15 20 years. Many young investors reckons they can calculate the potential growth and predict the next drop or rise from historical trends but still cannot read the future for a long term. End of the day none of these young investors I know are millionaires. Yes, there are plenty of success stories on Google, but no one blogs or shares about the ones who fail which most likely be 1000 times more in proportion.
Finding a quality long term share is like finding a long term partner. You need to fall in love first with the share. It must be a share you see around and use everyday. A share you trust with all your heart which will be still standing tall and successful when you retire. You must be compromising and bear with the ups and downs of the company business like in any relationship. If you walk out when times are bad, then you don’t show loyalty and should not be together in the first place. No one can predict the future, but if you trust your company you invest in bad times, you should reinvest more time and money to make the relationship better. So when shares drop you should buy more if you strongly believe the company will be around when you retire.
One key areas of long term investment is the DRIP (Dividend Reinvestment Plans) equivalent to having kids in a relationship. Try to avoid spending and withdrawing the dividends, instead reinvest it into the plan to grow the investment further. Its like a relationship where you need to invest your time with your growing kids for a better future. Please see the example on how DRIP can grow your money faster.
Remember when you invest your money in equity shares there is a risk of 100% loss. Leaving your money in a bank for interest generation bears no risk to the original amount, except to inflation of course in the country of the currency origin.
I share this because my dad left his money in the bank generating interest for 20 years and when I did a simple inflation calculation on the currency of origin, he in fact have lost about 20% of the value despite earning 3% a year. If he invested the amount in coca cola, he would have almost tripled his invested amount.
As Warren Buffett once said:- “The Rear View Mirror is clearer than the front view mirror”. I translate that to:- “Learn from the past to make the future a better place, and enjoy the journey”.
Finally what are my long term investment?
Apple, Microsoft, Shell, Disney and Unilever