Long-term Investments

Risks are inevitable in any investments and there are always something to worry about.
Suffice research enables you to better foresee and control risks.
Having a list can help keep one sane and reminded. Nevertheless, there is no universal guide that can guarantee success in investing due to the ever changing market, unpredictability and volatility.

Risks Control

-Read up on company's financial reports like Profit and Loss and Balance Sheet. Ask yourself which direction do you see the company is heading in the coming years with the current market circumstances and upcoming events.
(Note: Not all companies report honestly on their results in order to pass audit tests or to attract more investors)

-Choose an investment with proven track records on strong earnings. Blue chips or ETFs are often recommended.

-Have safety of margin, in terms of the share price you pay.

-Dollar Cost Averaging: If you ever bought shares during its high valuation and intend to hold, buy more when price drops and average your overall holdings to a lower price. ( Eg. $17.50 X 100 shares. Buy another 100 shares when the prices fall to $14.50. You then get an average price of $16/share
($17.50 + $14.50 divided by 2) This is a very common practice among investors.

-Be wary of high debts and leverage measures. The lower the Debts/Equity Ratio, the better.

-Keep yourself updated on global news, currencies, new financial policies and measures. The market is always changing. Use them to your advantage to foresee and make sound decisions.

-Dividends of 3.0% to 5% is optimal ,in my opinion, to keep one holding an investment. High dividends create suspicions by itself while low dividends may not be worth the effort and time holding a paper loss.
Nevertheless, growth investing is another factor to consider. A stock with low dividends may be worth holding if its price is expected to rise significantly in the future.

Cost Control

-Transaction (brokerage) fees are the Bane of investing.
It is highly recommended to place lot sizes that are worth the transaction costs
A $1 rise in share price of 100 shares is only a $100 gain where the transaction costs will take up 10% to 25% ($10 to $25) of your earnings.
Whereas, a $1 rise in share price of  200 shares ($200 gain) will only costs 5% to 12.5% of your earnings (In Singapore's context).

Behavioral Control

-Ignore short term paper wins/losses/noises.
-It is almost impossible to time the market in terms of when to sell the top or buy the bottom.
-Expert's opinions, price calls and discussions can be seen as guides but you should never take action until you can back their claims.

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