Defining a Long-Term Investment in the Stock Market

For some "long term" would mean holding a stock position over the weekend. For others, it may mean holding a security for at least 1 year for the purpose of declaring a long-term capital gain, thus saving on taxes.

The rigid definition of a long-term investment in the stock market would be holding a security for a minimum of 5 years, to as long as 30 years.

I'm going to tell you my definition of a long-term investment in a security by telling you a story. A true story!

My Mother worked as a teller in a small bank in Dover, New Jersey. The name of the bank was called The Dover Community Bank. While working at the bank (she eventually became a branch manager) she enrolled in the bank's dividend reinvestment plan, making purchases of the stock through pay-roll deductions from her paycheck. She continued purchasing the stock through the years, having the dividends from her shares in the bank reinvested into more shares every quarter. By the time she left the bank (in the early seventies) she had accumulated around 300 shares of The Dover Community Bank.

My Father, when he retired, had the dividends from those shares sent home ? to help ends meet. When my Dad passed away at age 80, my brother and I inherited over 7,600 shares of The Bank of New York, all originating from those 300 shares of what was once called The Dover Community Bank.

So, through this individual experience I have adopted my own opinion of what is called a long-term investment in a security. It is simply this ? securities should be purchased with the intent of providing dividend income to help ends meet during retirement, with the understanding that no one can successfully retire without financial freedom.

So every investment now in a security would be purchased with the intent of holding that security (and adding to it during the years) until the dividend income from that security is ample enough to ease the loss of income from retiring from my job. Now, I not only provide for myself during my retirement years, but will leave this earthly realm knowing that I will also be able to relieve some financial burdens for those I've left behind.

With this definite, concrete purpose for investing in mind, a definite, concrete plan would need to be created (and can be found in my book The Stockopoly Plan) to achieve this long-term investment goal. My Mother invested in only one stock and got lucky ? a considered plan would diversify.

If I am going to hold a security position forever, what criteria should I be looking for in that security? Certainly, dividend income ? that's a given! And since I never intend to sell the security, capital gains may not even be an issue (more on this later).

So then, what else? I would argue that a company that just pays a dividend isn't good enough. Instead, I will only purchase those companies that have a long history of raising their dividend every year. This will eliminate a whole bunch of risk. It would eliminate the possibility that the company is 'cooking their books;' after all, the money has to be there to pay the shareholder. And because this company has been raising their dividend every year for many years, it eliminates the risk of investing in a start-up company that may not even be around in a year or so.

Also, the rising dividend every year would help off-set the risk of inflation and the risk of a lower stock price during the year would actually accelerate my income from the security.

Since I would want my position in the stock to grow through the years, thus increasing my dividend income, all dividends would be reinvested into the stock, until retirement. A lower stock price, therefore, would purchase more shares, at a higher dividend yield and would simply accelerate my dividend income.

Now the question may arise, when would I want to sell a stock? Certainly not because a Merrill Lynch has downgraded the whole sector ? that's a blessing in disguise ? a temporary lower stock price just means a higher dividend yield, allowing my dividend to purchasing more shares.

The question of when to sell a stock puts me in the mind of a quote I once read by Jacobsen ? "Judgment is the one thing you cannot learn at college. You either have it or you don't have it." The time/reason to sell a stock varies. If there comes a time when you have so much money tied up in just one stock position that it's making you feel uncomfortable, sell some of it. If the company you purchased stopped raising its dividend you may want to lighten up and/or divert the funds you were putting into that security into one that is continuing its program of increasing their dividend every year.

A company may trim their dividend ? when and if this happens (and it does) my advice is not to be overly anxious to sell the stock. Find the reason why the company is trimming their dividend. It may be to reduce debt or for the possibility of acquisitions. The company's dividend yield may have been around 6 percent, and all their peers' dividend yields are around 4 percent. Certainly, do not add to your holdings in this company, but give management a chance to see how they handle the extra cash, since they appear to have better use for the money, other than to pay their shareholders. The resulting growth in that company may make up for the lower dividend yield and two or three years later you'll get a better perspective on whether to sell the company or not (or to continue adding more shares through new monies, or simply to allow the dividends to continue purchasing the stock).

For more excerpts from the book 'The Stockopoly Plan'
Visit: http://www.thestockopolyplan.com

You have permission to this article either electronically or in print as long as the author bylines are included, with a live link, and the article is not changed in any way (typos, excluded). Please provide a courtesy e-mail to charles@thestockopolyplan.com telling where the article was published. (word count 986)

Charles M. O'Melia is an individual investor with almost 40 years of experience and passion for the stock market. Author of the book 'The Stockopoly Plan - Investing for Retirement', published by American-Book Publishing.

Alto Pass chicago limos ..
In The News:

A benchmarking group for artificial intelligence has released new results evaluating the speed of hardware in running AI applications and responding to users.
Sierra Space’s Dream Chaser spaceplane provides a glimpse into the future of space travel. Traveling to space may become a part of everyday life.
The new European Hyperloop Center in the Netherlands aims bring in a new era of transportation. The center will use a steel tube as a proving ground for testing the new vehicle.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.
While it may be incredibly tempting to have a “go with the flow" mindset like the rest of your vacation, your technology definitely should not be compromised while traveling.
Have you ever accidentally deleted an app from your iPhone that you’ve already paid for? Don't worry. We’ve got a trick that will help you get it back without having to buy it again.
Apple's new Journal app has raised privacy concerns among Apple's userbase. Tech expert Kim Komando examines social media rumors and explains what steps to take to protect yourself.
Although Facebook has denied that our phones listen to us, they do have other ways of finding out what we are talking about, listening to and searching for.
With the integration of OpenAI technology, Figure 01 has taken a significant leap forward, showcasing the potential of robots to understand and interact with us on a personal level.
Port Ellen, newly reopened whisky distillery in Scotland, is using SmokeDNAi technology to understand mouth-feel and flavors during the whisky maturation process.
Telly, a smart TV firm, is promising to give out their 4K 55-inch TV for free. What must you give in return? The innovative, yet potentially unsettling, answer might shock you.
The moment a spam invite hits your calendar, it’s like an uninvited guest at a party. So, what do you do? Show it the door.
Identity thieves are now targeting children and are making large sums of money by exploiting children's identities, possibly hurting their financial future.
There's a clever way to change the notification sounds on your Android without having to look at your screen. Kurt "CyberGuy" Knutsson explains.
If your bank accounted has been hacked, there are a number of steps you can take to prevent it from happening again. Kurt "CyberGuy" Knutsson explains.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.
The Wave House, a data center in Heidelberg, Germany, is the the largest 3D-printed building in Europe. Its walls were built in about 140 hours.
Some government agencies around the world are struggling to meet their staffing goals when it comes to hiring artificial intelligence experts.
Google Maps' recent upgrades have introduced real-time ETA and turn-by-turn directions to your phone's lock screen while you are traveling.
Kat Cammack says AI could disrupt the 2024 election. A report says shared AI image tools generate election disinformation in 41% of cases and voting disinformation in 59% of cases.
Deepfakes have become commonplace, and the technology is only getting better, but there are certain elements that might give away the fact that an image is AI-generated.
A stealthy technology known as EM Eye allows eavesdropping on your home security cameras, according to Northeastern University researchers.
Give your iPhone an extra layer of security. Tech guru Kurt "CyberGuy" Knutsson explains the easy steps for changing the security passcode on your iPhone.
Kim Komando shares expert tech tips to maximize productivity. Learn screen recording hacks and file organization tricks to streamline your digital workflow.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.

Investing in Stocks and The Game of Monopoly

To begin, you might look at playing the stock market... Read More

The Holy Grail (of Investment)

Every year I go to the Money Show in Orlando,... Read More

The POWER of a Proven Stock Investment Plan

When you invest in the stock market for ever-increasing cash... Read More

How To Pick A Mutual Fund

Mutual funds by definition are a mixed bag of stocks,... Read More

Successful Trading ? Taking Profits - Part 2

Suppose your position has made a big move and you... Read More

Political Investing

We have two candidates for president that have really different... Read More

NASDAQ 800?

In November of 2000 when the NASDAQ was trading at... Read More

Economists

In today's volatile and confusing stock markets everyone is searching... Read More

The Stock Market is a Roller Coaster: Prepare for the Ups and Downs

IT'S REMINISCENT OF THE OLD children's tale about an old... Read More

Nest Eggs and Omelets

Do you have a nest egg? You know, a place... Read More

Market Success

Who are the successful investors?There are those who follow the... Read More

An Old Proverb for Investing

"If you don't know where you are going, any road... Read More

Online Trading Strategy: Collecting Cash when Stocks Go UP - It PAYS to Know More than Others

When it comes to stock market trading it PAYS to... Read More

Picking Mutual Funds to Outperform the Market

With over 6,000 mutual funds available, it may be tempting... Read More

Paddle Your Canoe

At some time in your life you have been on... Read More

The Cub; II

We keep hearing about this bear market and that the... Read More

Its Better

Question: How does it get better when it gets worse?Last... Read More

Two for the Money

Look back over the years and try to remember how... Read More

The Shadow

The Shadow knows. There used to be a radio program... Read More

Seecrets on Investment: Tired of Making Huge Losses in the Stock Market ? Part 2

Fundamental analysis.Fundamentals analysis says the best way to predict the... Read More

War Market

There is no question that the stock market is being... Read More

You Don?t HAVE To Be Trading

As a novice trader, you'll often feel the need to... Read More

Trading Tips No 8: Picking the Best Stock Market Price

Carefully thinking through your goal as a trader is of... Read More

Inertia Syndrome

When it comes to buying a stock or mutual fund... Read More

Structured Settlement; Lawyers in NY and Mutual Funds

Minority Report the movie may not be far off if... Read More

Alto Pass cool limo ..