Are you looking to build a strong portfolio that will help grow your money in the next 15 to 20 years? Make sure to include long-term stocks in your investment portfolio. If you are still confused then, here is a detailed guide to investing in long-term stocks and the best stocks to buy in India for long term.
You must have already multiple times from past generations that they bought some stocks of TATA Steels in the early 90s and ended up multiplying the value a hundred times by the late 90s. It is because they invested for the long term after understanding the upcoming growth trend of the industry. This is a simple way to grow wealth without having to sell and buy continuously.
The long-term investment is for those who simply want to take advantage of value buying and growth. You can buy undervalued stocks of those companies which are showing positive signs of growth in the future in terms of the economy and the industry. Simply buy the stocks and keep them long-term to build value and wealth.
10 Best Stocks To Buy In India For Long Term
Commonly people tend to invest for at least 15 years in long-term investment instruments to see a positive result. There are also multiple advantages like less risk involved, lower taxes, and compounding the money in the long run. Read ahead to understand what are long-term stocks, their benefits, and how to choose the best Indian stocks for the next 10 years.
What types of stocks to invest in?
Long-term stocks are known for their ability to grow in value and increase return generation after a prolonged period. These stocks are not only for generating returns but also to safeguard the corpus, unlike other high-risk instruments.
Stocks of large-cap companies are the ones that are most suited for those who are risk averse and like to maintain their corpus amount during the investment period.
These companies tend to have a market capitalization of INR 20,000 crore and more. You can also choose small and mid-cap companies for long-term investment. But, then one should understand that with these companies there will be an amount of risk involved.
These companies are not known for capital protection, but if chosen right, picking these best stocks to buy in India for long term can be highly profitable with substantial capital growth.
Why choose large cap companies?
Large-cap companies are stable organizations with large funds and industry presence. It means they do not get highly impacted by the economy and industry conditions. Even under dire conditions of the market, these companies tend to maintain their stability in terms of stock value and dividends.
Therefore, you can say that these companies are the safest choice in the trading and investment market. If you are averse to risk and want a steady flow of quarterly, half-yearly or annual payments of dividends, then these are a perfect choice.
Why choose small or mid-cap companies?
Small or mid-cap companies that are suitable for long-term investment may not have large funds, but they have a good financial history, sound management, and good growth prospect in their industry.
These stocks gain through fluctuations in the market. Small cap companies tend to rely on larger investments so that they can be used to generate profit with proper management and industry knowledge.
The profits are then reinvested to expand the company in the niche market. Investors can take advantage of the continuous growth of the company and the increasing prices of the shares.
One thing to keep in mind is that investors with considerable risk appetites should choose small and mid-cap companies for their long-term stock investment.
This is because there is always a risk of hitting rock bottom due to stock market conditions and a bad economy. Always choose safer and growth-friendly opportunities in the market as they are the best Indian stocks for the next 10 years.
Why it can be difficult to hold stocks?
Before learning about the best stocks to buy in India for long term, it is important to understand how to keep these stock for a long time. One of the biggest issues that are faced by the investors is timing their trading wrong. On paper, long-term stock investment does sound good and safe.
But, in reality, many investors tend to struggle with long-term investment because most of them are poor in timing the market. Share market is not an easy place to get used to. There is constant change and market fluctuations rocking the price of the shares and the company’s current financial standing.
Most investors tend to have a pessimistic outlook when it comes to holding stocks for too long. Sudden shocks in the economy can cause sudden downward movement of the prices, and that is when people turn pessimistic, instead of waiting out and having an optimistic vision, they panic and sell.
Also, investors tend to have a fear of regret. Whenever the market drops, they fear that if they hold the stocks for too long, they will regret the same in the future.
It is solely based on the fear that these short-lived movements are permanent. Most of the time, they are not permanent, and the market tends to bounce back. But, that constant fear of regret and having next-to-no faith in one’s judgment, lead to panic selling.
To have a successful long-term investment run it is crucial to overcome these issues from the start. Constant doubting and fear can ruin the long-term plan and cause more harm than good. If you can solve these investment mindsets, then below mentioned 10 best shares to buy today for the long term are for you to choose from.
Also Read: How To Invest In Foreign Stocks From India
Best stocks to buy in India for long term
Below is a table of the 10 best stocks to buy in India for long term:
|Sr. No.||Name of The Company||Industry||NSE Code||Current Stock Price (INR)||Market Cap.(INR)||P/E Ratio||Dividend Yield (%)||52 Week Low (INR)||52 Week High (INR)|
|1||Reliance Industries Ltd.||MNC Conglomerate||RELIANCE||2,507.20||16.98T||25.36||0.36||2031.1||2856.15|
|4||Hindustan Unilever Ltd.||FMCG||HINDUNILVR||2631.75||6.19T||67.48||1.29||1901.55||2859.3|
|6||Caplin Point Labs||Pharmaceuticals||CAPLIPOINT||784||59.43B||19.97||0.45||626||1008.4|
|8||HCL Technologies||Computers And Software||HCLTECH||948||2.57T||–||5.06||877.35||1377.75|
|10||KEI Industries||Electrical Products And Equipment||KEI||1322.85||111.18B||27.05||0.20||6982||1377.35|
Benefits of long term stocks
Following are some of the benefits of investing in the best Indian stocks for the next 10 years:
- Override Negative Times: The market can run negative due to multiple reasons, but in long term, one can override these negative conditions. Most of the time market tends to digest these negative turnings and start its upward climb after some time. The long-term investment allows the investors to not sell in bleaker times and instead help wait it out.
- Fewer Taxes: When it is compared to intraday or short-term investments, taxes levied on long-term capital gains are less. It means one will end up saving on their taxes with long-term stock investments.
- Less Overhead Expenses: Long-term trading accounts are not that expensive as they have lower charges. Most brokers will charge a fixed fee instead of a percentage-based fee that intraday or short-term trading accounts charge.
- Higher Potential Earnings: As mentioned above, the downward movement of the market is temporary, and long-term stocks tend to perform positively in long run. A good company with outstanding management and growth ideas can easily outgrow others in their sector. It will lead to an increment in the value of the shares over time if one has enough patience and a well-diversified portfolio.
- Compounded Earnings: In long-term investments, if one has invested in defensive or blue-chip stocks, they can earn big returns due to market stability. Now, the plus point here is that your earnings in form of dividends can be reinvested. Investing in the best stocks to buy in India for long term will allow you to compound your earnings by gaining interest on the dividends.
Drawbacks of long terms stocks
Following are some drawbacks of investing in the 10 best shares to buy today for the long term:
- Taxes: Dividend earnings from large-cap companies are levied with taxes to be paid if they exceed a certain point. Individuals are taxed at 15% on capital gains from shares.
- Low Liquidity: Another drawback is the lack of liquidity in emergencies. For long-term investment, the corpus gets locked up for a period that is more than 12 months. It means you cannot liquidate your investment for the set period.
How to choose the right stocks?
Now that you are well aware of the best stocks to buy in India for long term, and why investing in them is beneficial, let’s see how to choose the right stocks:
- Size Of The Company: One of the crucial factors you should not ignore is the size of the company. A big company in a big market will have better chances to grow than a small company in a big market with strong competitors. Bigger companies tend to have better contingencies in place along with financial stability to keep themselves stable in a bad economy and grow when the times are good.
- Innovation: A company that is constantly updating itself and choosing innovation over stagnancy is the one that will grow with time. As market and demand change, constant innovation is a must. Always pick a company that is innovative and forward-moving in terms of technology and trends.
- Avoid Falling Stocks: If a stock is falling in the current market then one cannot guarantee when it will redeem itself back to an upward movement. Instead, choose shares that are growing gradually and methodically over time to stay on the right side of the investment.
- Liquidity: Volume and liquidity of the stocks are factors you should not avoid while choosing stocks for long-term investment. If a stock has low volumes then there will not be many buyers in the market at a given time. It can be a big hindrance in case you need to sell your stock for emergency cash.
- ROE: Return on equity is a measurement of a company’s performance in the market. A company flailing in terms of ROE is not a positive prospect for long-term investment. Low ROE is something that will not improve overnight, and therefore, it is advised to choose companies with high ROE backgrounds.
- Transparency: Transparency is the key. A company should be open about its all-party transactions and auditor’s reports. Not being open about the reports and hiding facts and figures is a sign that one should not invest in such a company.
- Secular and Cyclical: Cyclical stocks tend to have a peak time and after which due to low customer demand or economic factors, they tend to fall in value drastically. On the other hand, secular stocks are the ones that are evergreen and do not have a seasonal trend. Regardless of the demand and economy, they maintain their prices, providing a haven for the investors.
- Penny Stocks: Many investors tend to have a higher risk appetite and therefore look for risky stocks for higher returns. But, investing in penny stocks can be quite risky as they have higher tendencies to crumble under market pressure. At times, it is better to stay away from penny stocks and choose a large company based 10 best shares to buy today for the long term.
- Corporate Governance: Reliable board of directors and proper management play a big role in how a company will perform in the long run. A company with shady governance and unreliable leaders tends to lose its reputation fast, thus causing major losses to shareholders. Always choose a company that has strong management and corporate governance history.
Also Read: 12 Best Stock Portfolio Trackers
When choosing to invest in the stock market, safety is one of the major pillars that you should not avoid at all costs. And, nothing is safer than investing in defensive or blue-chip stocks for the long term.
Long-term investment will not only help avoid high risks conditions but will also help those who are not that keen on short-term or intraday trading.
Above mentioned best stocks to buy in India for long term are one of the safest and fast-growing shares in the market right now. All you need to do is, understand their historical data, their growth pattern, and their current market position. With timely research and in-depth knowledge, anybody can start their journey toward long-term capital gains.
Source Reference : https://moneymint.com/best-stocks-to-buy-in-india-for-long-term/