Inside the strategy buy and hold, one of the aspects most valued by small investors is how to obtain a long-term profitability. How do you get it? What kind of securities should you choose? Or do your interests run many risks? They are just a few approaches what retailers come to. Of course, these kinds of objectives require a series of approaches that must be met and that we will explain to you through this article.
Generally, the savers who go for this period of permanence have a very well defined profile. These are conservative investors, who they seek security more than profitability itself. They focus on highly liquid securities, which are included within the main stock market indices, not only national, but also in other geographical areas. And in any case they flee from the riskiest proposals that are represented by speculative values.
Once you have analyzed how investors are looking for long-term profitability, it will be time to focus on what class of securities make up your investment portfolio. Blue chips are one of your favorite options, and that are present in most of his performances. In this sense, it must be remembered that these values represent those with the highest specific weight of the national selective index, the one known as Ibex 35. BBVA, Santander, Iberdrola, Endesa and Repsol are its members.
Very defensive values
The securities that are recipients of their operations do not offer large fluctuations in their prices. Not in vain between the maximum and minimum prices of their prices in the same trading session do not offer great differences. Another of his contributions is that it is a group of actions that offer a high dividend yield. With a fixed and annual profitability that ranges between 3% and 8%, through one or more payments per year. This remuneration to the shareholder makes the investor constitute a fixed income within the variable.
The reason for this investment strategy in long-term profitability is due to the fact that it exceeds the weak profit margins currently offered by the main savings products (deposits, bank promissory notes, public debt, etc. ). And that in any case, do not exceed more than 0,50%. As a consequence of the monetary policy of the European Central Bank (ECB) to lower the price of money. And that has led to it being at 0%. Something that had never happened in community economic policy.
Other conservative values for which these investors choose are those from very stable sectors, both in their business lines and in their prices. Among them, the power supply, highways, and especially the electricity companies stand out.. Precisely the latter with a wide and diversified representation: Gas Natural, Endesa, Iberdrola, Enagás and Red Eléctrica Española, among others. They are not lacking in a term portfolio of these characteristics. Not surprisingly, they provide greater stability to the savings of small and medium investors.
What are the objectives?
Developing and maintaining a long-term profitability strategy requires very well-defined characteristics, which you should not overlook when developing your strategy. You will certainly have to define permanence in the equity markets. With a maximum term that ranges between 5 and 10 years approximately, in which securities with increasing interest can be selected, under a minimum capital that will be based on the equity contributed to these operations in the stock markets.
The most common formula to channel this kind of investment is to let yourself be carried away by the reality of prices. So that as the terms are longer, the profitability becomes more attractive, although in percentages not very striking as to make large operations. And of course, as long as there is no event that makes the stock markets totter, as happened at the beginning of the last economic crisis, in 2007.
In long-term investments you will not find revaluations of any relevance, much less that they will make you a millionaire. Not surprisingly, what most of the cases are about is guarantee the entire capital invested. Obtaining a return that exceeds that of fixed income, and of course, without assuming excessive risks. It does not matter because you go through processes where you will lose part of your contributions. There will be more years to recover it, and even increase it.
What psychology should you have in these operations?
The recent drop in interest rates has had as its main consequence a notable decrease in the profitability of bank deposits. And one of its consequences is diversion of a good part of savings to equities, and especially to the stock market. But you must maintain a series of actions that are not usual in short-term operations, and that require special attention on your part.
You should not focus on the specific movements of the financial markets, since it is not a purpose. It may even be prudent that you neglect your operations as they contemplate such high permanence periods. It is very important that you do not subscribe very erratic company shares, and that they may even disappear as a result of their management. The more stable the companies are, the better it will be for your interests. Stability is the main factor you should look for when selecting the components of your choice.
Characteristics of these terms
Like other investment strategies, this option in equities carries a series of advantages and disadvantages that you should know. And that in most cases will depend on the profile you present as an average investor. Faced with this scenario that reflects long-term permanence in the stock markets, you will have no choice but to analyze their benefits. And where its advantages will be reflected first.
- They offer growing interestIn such a way that as one looks at more years, the profitability of the portfolios created will increase, but without reaching disproportionate levels.
- They do not guarantee the invested capital, but in exchange for providing good performance prospects, which can be enhanced with the dividend remuneration generated by a large part of these proposals.
- There are different strategies for hiring, depending on the profile you present, and where the most favorable for your interests is diversifying investment, and not focusing on a single value. This is a very useful way to protect savings in such a long period of time.
- Long-term investment allows you choose from a wide range of values, both from national equities, and from abroad. Trying to always seek the greatest potential for profitability, even opting for the purchase opportunities that are surely emerging every year.
Disadvantages of long-term trading
These very dense terms also carry certain risks that you must assess to make the investment. And that in the first place it can suppose you a lack of liquidity to meet certain expenses in your personal life (tax obligations, payment of the mortgage payment, the children's school, or simply some unforeseen disbursement in your family budget). But they are the only problems that you can find in this situation. There are other factors that you should also think about. And among which the following stand out.
- Suppose to have a immobilized capital for a relatively long time, although you can make partial sales to get the necessary liquidity. Although with the obvious risk that the prices of your shares are at those times below the purchase.
- The minimum capital that you dedicate to investing in equities is generally higher than in other financial products, which will affect the real state of your personal accounts, and what it can make you do punctual rescues of other financial products (time deposits, investment funds, warrants or derivatives, among others).
- The return that the investment offers you in the end may not be so attractive as to keep them for so many years, search for other financial products with better benefits. And even with a guaranteed return, although the normal thing is that it is very small and does not satisfy your plans as a long-term saver.
- These high permanence classes are aimed at an overly conservative type of saver profile that seeks security and clarity instead of risk and greater profitability. The first thing you will have to do is define if you meet these characteristics and follow their investment models. You may even be confused, and you really fit into another not so long-lived profile.
Is it worth lengthening the deadlines?
Five, ten or even more years is a very long period to maintain positions in the equity markets. Not very young users, if of course retirees should follow these long-term approaches. Only in the middle ages will it make any sense, and provided that there is savings that will not be needed for many. If your intention in the coming years is to buy a house, forget about these investment strategies. Because it is not the most suitable for your interests, and it can even seriously harm your interests.
In any case, it is a strategy to invest a small part of your savings, and with the intention of creating a savings bag for the next few years. And that can be combined with the contracting of other banking products, and why not, of different financial assets that can make your savings profitable from now on.