Best Stocks for Long-Term Investment: Strategies to Combat Inflation and Ensure Financial Security

Introduction

Certain stocks have consistently shown the potential to not only grow over time but also to provide a stable source of income through dividends. For those looking to hold stocks for 10 to 20 years or longer, this article provides a comprehensive guide to identifying the best stocks, their characteristics, and how to invest in them effectively.

Understanding the American High Dividend Handbook

To make informed investment decisions, one highly recommended resource is the ‘American High Dividend Handbook’. This comprehensive guide includes all common stocks that pay dividends above 3.5%, sorted by price dividend percent. The book also features charts that categorize the stocks alphabetically and by score, with the score sort being the easiest method to identify the best stocks. Each stock is accompanied by a 20-year trend of share price and dividend payouts, offering a detailed historical perspective of the company's performance.

Why Stocks are the Best Defense Against Inflation

While inflation diminishes the purchasing power of money, stocks can offer a better return over the long term. Historically, stocks have provided a yield of 10% on average over the last 100 years, compared to just 0.7% at the most that banks offer today. This makes stocks a strong hedge against inflation, ensuring that your money retains its value over time.

Inflation is a decrease in the purchasing power of money, reflecting a general rise in the prices of goods and services. If you keep all your money in the bank in 2021, it will be worth less by the end of the year due to the current inflation rate of 5%. Contrast this with stocks, which can offer an average return of 13.6% in recent years.

Diversification and Market Strategies

There are primarily two types of investors—those who like to eat well and those who like to sleep well. In this context, sleeping well means focusing on long-term stability and growth rather than short-term gains. Over 40 years, the strategy of investing in a broad market index fund like Schwab 1000 Index Fund SNXFX proves effective. Here’s how to do it:

Call Charles Schwab and request to buy Schwab 1000 Index Fund SNXFX.

Add to the fund automatically to ensure consistent investment over time.

Avoid the temptation to time the market—stick with a long-term approach.

When the market dips, continue buying as it can lead to better average cost per share.

At the age of 50, allocate about 1/3 of your portfolio to bonds to balance risks and generate a steady income stream.

Three Best Stocks for Long-Term Holding

Dixon Technologies India Limited

Reasons for Holding:

Expected to deliver a good quarter. heeft shown a profit growth rate of 35.50 CAGR over the last 5 years. Trading at 33.77 times its book value. Generating better returns on equity than bank fixed deposits (FD). Not in overbought zones. Not in ASM/GSM lists and no significant promoter shareholding is pledged.

Bajaj Auto

Reasons for Holding:

Almost debt-free company. Providing a good dividend yield of 3.66. Consistent in maintaining a healthy dividend payout at 61.76.

Tata Elxsi

Reasons for Holding:

Almost debt-free company. Lots of equity return over the past 3 years (ROE: 29.69). Consistent in maintaining a healthy dividend payout at 50.11. Trading at 25.29 times its book value.

These stocks offer a combination of growth potential and stable dividends, making them suitable for long-term holding.

Additional Resources and Recommendations

For more detailed analysis and real-time market insights, consider following the "Stock Masters" Telegram channel. Regular updates and expert advice can help you stay informed and make well-informed investment decisions.