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By THE INVESTOPEDIA TEAM, Updated April 10, 2022
Reviewed by ROBERT C. KELLY
Fact checked by YARILET PERE
What Are 10 Tips for Successful Long-Term Investing?
While the stock market is riddled with uncertainty, certain tried-and-true principles can help investors boost their chances for long-term success.
Understanding Successful Long-Term Investing
Ride a Winner
Sell a Loser
There is no guarantee that a stock will rebound after a protracted decline, and it’s important to be realistic about the prospect of poorly-performing investments. And even though acknowledging losing stocks can psychologically signal failure, there is no shame recognizing mistakes and selling off investments to stem further loss.
Don't Sweat the Small Stuff
Rather than panic over an investment’s short-term movements, it’s better to track its big-picture trajectory. Have confidence in an investment’s larger story, and don’t be swayed by short-term volatility.
Don't Chase a Hot Tip
Regardless of the source, never accept a stock tip as valid. Always do your own analysis on a company before investing your hard-earned money.
Tips do sometimes pan out, depending upon the reliability of the source, but long-term success demands deep-dive research.
Pick a Strategy and Stick With ItThere are many ways to pick stocks, and it’s important to stick with a single philosophy. Vacillating between different approaches effectively makes you a market timer, which is dangerous territory.
Don't Overemphasize the P/E Ratio
Investors often place great importance on price-earnings ratios, but placing too much emphasis on a single metric is ill-advised. P/E ratios are best used in conjunction with other analytical processes.
Focus on the Future and Keep a Long-Term Perspective
Investing requires making informed decisions based on things that have yet to happen. Past data can indicate things to come, but it’s never guaranteed.
Many great companies are household names, but many good investments lack brand awareness. Furthermore, thousands of smaller companies have the potential to become the blue-chip names of tomorrow. In fact, small-cap stocks have historically shown greater returns than their large-cap counterparts.
Resist the Lure of Penny Stocks
Some mistakenly believe there’s less to lose with low-priced stocks. But whether a $5 stock plunges to $0, or a $75 stock does the same, you've lost 100% of your initial investment, so both stocks carry similar downside risk.
Be Concerned About Taxes but Don't Worry
Putting taxes above all else can cause investors to make misguided decisions. While tax implications are important, they are secondary to investing and securely growing your money.
While you should strive to minimize tax liability, achieving high returns is the primary goal.