MoneyLife

11 Noteworthy Long-Term Investing Strategies

By Anna Yen

When you finally have a little cash on hand, you might wonder whether you should save or invest. If you’re going to invest, what works best? 

Long-term investment strategies are planned approaches to investing that often rely on patience. They guide financial decision-making processes all while providing discipline for your investing approach.

Let’s take a look at a few long-term investing strategies worth reviewing before you pull the trigger.

1. Start now

The best time to start is early. The longer you invest money, the more time you have for your money to grow exponentially through compounding. If you haven’t gotten started yet, no worries! 

Investing when you can and sticking to long term investing strategies launches you on the path towards achieving financial success. Even if you’re only investing $10, you can watch it grow rather than see it lose value due to inflation, which is the rising cost of goods. 

2. Buy and hold investments

One strategy is to pick individual stocks and hold them. Although simple, the buy and hold investment strategy can be psychologically hard. You might sabotage your own efforts, selling off investments at the wrong time. Adopting a buy and hold strategy keeps you from trying to trade too often.

For a successful buy-and-hold investment, look for stocks that are likely to be around for a long time. These are typically stocks with a market-leading brand that are not easily replaced. Also, keep your individual positions small and try to set up a diversified portfolio. It’s really hard to pick stocks, so if you do, balance them out with plays that will keep up with the entire market.

3. Growth investing

A growth investing strategy involves looking for young or small companies with the potential to grow faster than their peers or the broader market. Investing with this growth strategy exposes you to the fastest-growing sectors, and you get to learn about the companies that are actively creating the future. 

While this may be exciting, approach with caution. These stocks typically gain in value based on expectations. If they fail to live up to these high expectations, the stock price could fall drastically. Thoroughly study the companies before you invest, and avoid buying growth stocks on a whim.

4.  Momentum investing

Momentum investing looks at price momentum instead of revenue growth or earnings. Top-performing stocks in any given period often continue to outperform others as more investors pile on. On the flip side, depressed stocks often continue underperforming. 

After looking at recent price performance, a momentum investor would buy outperforming stocks and sell underperforming stocks. It’s best to avoid small companies with liquidity issues.

The risk of this strategy is that momentum can start acting against you.

5.  Value investing

Value investing requires identifying and buying quality stocks that are underpriced. Knowing how to read financial statements helps you find undervalued companies. You’re basically looking for good deals on stocks and happily waiting for performance to take place over the long run. This offers you a reasonable margin of safety when the overall market trends down. 

Famous investors like Warren Buffet have applied value investing strategies to achieve consistent long-term results. 

6.  Small-cap stocks

This strategy is based on the idea that smaller companies have more potential for growth than larger corporations. The thought is that it’s easier to double revenue for a company worth $200 million than it is to double revenue for a $10 billion company. Smaller companies can also fly under the radar and trade at a discount since larger institutional investors overlook them. 

But investing in small caps companies can be challenging. You may not find a lot of readily available research. Small cap stocks can also be less liquid, with share prices that are more volatile. 

7.  ESG Investing

ESG Investing strategy applies three non-financial factors as a core part of the analysis of a stock’s growth opportunities and material risks. These three factors are environmental, social, and governance.

The basis of ESG investing is that companies that take ESG metrics seriously are more likely to thrive. ESG rating services from research companies have grown to help with stock selection. While ESG metrics may be important, performance is still likely going to be based on profitability.

8. Factor investing 

This approach takes into consideration factors characteristic of stocks that have performed strongly over time. The aspects covered above–market value, growth, and momentum–are some of the factors involved.

These factors are condensed into quantifiable metrics, and investors can then use them to build an evidence-based portfolio.

9. Dividend investing 

Dividend investing is the long-term investment strategy of buying stocks that pay a stable or increasing dividend. The goal of dividend investing is to receive a regular income from your investment.  

Stocks with high-dividend yields are typically profitable but they might have relatively low growth rates. However, you can reinvest your dividend for faster capital growth. Dividend investors also hope companies will stay stable during recessions.

10. Portfolio diversification

Diversifying your portfolio allows you to generate the best risk-adjusted returns on your investment. Stocks typically generate higher returns, but they can be quite volatile. A well-diversified portfolio should consist of several asset classes–such as stocks, bonds, commodities, cash, hedge funds, and real estate–to reduce volatility and overall portfolio risk. You can further increase diversification by spreading your stock portfolio across the investing strategies listed above.

11. Thematic investing

Thematic investing relies on forecasts about trends for investment decisions rather than the historical performance of the market or other factors.  For example, investing in anything involved in the growth of the internet was a thematic investment decision popular in the 90s. Themes can be focused on any trend or concept. Examples include IT, climate change, or robotics. 

Ready to play the long game?

Long-term investing strategies take some of the stress out of watching daily market moves. If you’re not sure how to apply these strategies, you might need additional help.

For only $1/month, a fully-managed MoneyLion investment account helps you effortlessly invest in a diversified portfolio. Designed for long-term investing, the MoneyLion investment account offers fully automated personalized portfolios, thematic investing, and more. 

Start investing with no maintenance fees or minimum balance. You’ll get a customized portfolio that has been dynamically rebalanced by professional advisors. Even first-time investors find it easier to reach financial goals faster with MoneyLion.

Sign Up
Sign Up

Discover effortless investing

We'll help grow your money using the same techniques trusted by some of the countries' wealthiest investors, even if you start with $5. Get your personalized, fully managed portfolio now.