Many stock market experts suggest holding stocks for the long term. The S&P 500 Index has experienced losses in just 10 out of 45 years between 1975 to 2019, which makes stock market returns very unpredictable in shorter timeframes. Here are the best stocks to buy in India for the long term.
Why do investors buy long-term stocks?
Investors buy long-term stocks so that their money grows over time. A long-term investment is a strategy of purchasing assets that grow faster and are safer when held for a significant period of time. The assets are usually real estate and stocks that you plan to keep for a while.
A review of several decades of historical asset class returns reveals that stocks have outperformed nearly all other asset classes. The S&P 500 Index has generated an average return of 9.5 percent each year from 1928 to 2015. The S&P 500 Index's returns compare favorably to the 5 percent return of 10-year Treasury notes and the 3.5 percent return of three-month Treasury bills.
If the stocks are held for the long term, investors have the opportunity to ride out some of the highs and lows to generate a better long-term return. Also, investors are taxed less when they hold their investment longer.
What to look for in long-term stocks
Investing for the long term requires discipline and patience. There are various fundamental factors that analysts use to shortlist which stocks are good long-term buys. Here’s a step-by-step guide to picking the best long-term stocks to invest in.
- Do your own research and understand the company's business model. You should do technical and fundamental analysis to calculate the fair value of the stock. You also need to understand the company's prospects to ensure that it’s aligned with your strategy and objectives.
- Use a mixture of qualitative and quantitative stock analysis to build your portfolio. Qualitative factors to consider include company news, financial events, personnel changes, and more. Quantitative factors to consider include dividends, ratios, earnings releases, balance sheets, and more.
- Avoid buying or selling stocks based on emotions.
- Ensure that the risk is spread by diversifying your portfolio.
What are the best long-term stocks to buy in India?
Overseas investors should consider investing in Indian digital to consumer sector companies because the economic fallout of the COVID-19 pandemic makes businesses' valuations attractive. The best long-term stocks to buy in India now are HDFC, Hindustan Unilever, SBI Card, Aarti Industries, and Axis Bank.
How to buy long-term stocks in India
The most common option among investors includes investing in India-focused mutual funds in the U.S. and ETFs based on Indian stock or Global or American Depository Receipts.
To trade stocks listed on Indian stock exchanges from the U.S., you need to either open an account with a SEBI-registered Indian stockbroker or open an account with an international brokerage firm that's regulated by the SEC. International brokers that allow you to buy or sell Indian stocks include Interactive Brokers, Charles Schwab, and Fidelity Investments.