To succeed in long-term investing, selecting the right stocks is crucial. Instead of reacting to short-term market fluctuations, investors should focus on evaluating a company’s long-term growth potential and competitive advantages.
However, for beginners, identifying long-term trends such as AI and semiconductors from the outset can be challenging. That’s why it is advisable to start by selecting companies that are likely to maintain stable growth over the next decade. This article outlines the key factors to consider when choosing stocks for long-term investment.
1. Does the Company Have a Stable Long-Term Growth Trend?
The fundamental criterion for investment decisions is whether a company demonstrates stable long-term growth. Companies with consistent revenue growth are more resilient to economic fluctuations, making them suitable for long-term investment.
For example, Costco has a solid business model and has consistently grown over the years, making it an attractive and easy-to-understand option for beginners.
2. Does the Company Have a Competitive Advantage?
For a company to generate long-term profits, it must possess strengths that competitors cannot easily replicate. Competitive advantages can come from patents, brand power, economies of scale, and other factors.
For instance, Berkshire Hathaway, led by Warren Buffett, has a strong management team and a diversified business portfolio, enabling it to achieve long-term stable growth.
3. Is the Company Aligned with Long-Term Market Trends?
Companies that align with major social and economic trends are more likely to sustain growth. Beginners should start by investing in stable companies to gain experience and later expand their investments based on long-term trends.
4. Does the Company Have Strong Leadership?
Even the best business models depend on the competence of the management team. Evaluating a company’s leadership, including its vision and track record, is essential for determining its long-term success potential.
Warren Buffett exemplifies the principles of long-term investment. Under his leadership, Berkshire Hathaway has maintained an average annual growth rate of 20% for over 50 years, making it an attractive choice from a long-term investment perspective.
Core-Satellite Strategy and Risk Management
When investing in individual stocks, beginners should prioritize diversification to mitigate risk rather than making large investments all at once. Implementing a core-satellite strategy can help build a well-balanced portfolio.
- Core: Focus on high-quality, diversified ETFs or index funds, such as the S&P 500 or global stock indexes, to ensure stable growth.
- Satellite: Gradually incorporate individual stocks that you understand, allowing you to deepen your investment knowledge.
Personally, I use globally diversified ETF as the core of my portfolio and complement them with individual stocks of high-quality companies such as Berkshire Hathaway, as well as semiconductor stocks that align with long-term market trends. This approach enables me to gain experience in individual stock investments while controlling risk.
Long-Term Trends in the Semiconductor Market and Investment Outlook
While beginners should initially focus on stable companies, they can later explore long-term market trends as they gain experience.
The rapid advancement of AI has significantly increased the demand for semiconductors. This trend is expected to continue, making the semiconductor industry an attractive long-term investment opportunity.
Last year, when semiconductor stocks declined across the market, I saw it as an investment opportunity. However, instead of focusing on companies like NVIDIA and TSMC, which handle the final stages of semiconductor manufacturing, I paid attention to companies supplying essential materials for all semiconductor production.
With the emergence of Deep Seek technology, AI models can now be developed without relying on cutting-edge semiconductors. This shift could intensify competition among semiconductor manufacturers.
Nevertheless, regardless of technological advancements, semiconductor manufacturing materials will always be in demand. As global semiconductor demand continues to grow, companies supplying these critical materials are likely to experience stable revenue growth.
Conclusion
To succeed in long-term investing, it is essential to start by investing in stable companies with long-term growth potential and gaining experience. Gradually expanding investments based on broader market trends will further enhance success.
By utilizing the core-satellite strategy, beginners can first invest in globally diversified ETF or the S&P 500 and later make satellite investments in specific sectors they understand. This approach minimizes risk while maximizing growth opportunities.
For beginners, rather than chasing trendy stocks, it is crucial to identify companies that will continue growing even after ten years and gradually start investing in them.
Remember, successful investing is a marathon, not a sprint. Stay patient and keep learning!
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