Smart ideas to pick winning long-term stocks

The right stock selection can do wonders for your long-term portfolio. This article talks about why you should take a leaf out of Warren Buffett' book and invest for value in businesses with lower debt and higher profitability, as well as look for companies that have demonstrated scale, have a long-term plan in place and can tide through volatility. With the right approach and discipline, you too can have a stellar portfolio.

The primary advantage of a long-term investment is the opportunity it provides for growth. By staying invested over a period of time, you essentially neutralise – and even reverse – any impact of negative runs because of the very nature of the stock markets. Another advantage is that you can cope with inflation better. This is because the purchasing power of an uninvested Rs 100 today will be much less in the future, assuming a modest inflation rate of 8%.  Let’s take an example. Suppose you wish to invest Rs 10,000 today and expect to stay invested for 20 years. However, if you need to ensure the same purchasing power as Rs 10,000 today, you will need an amount of Rs 67,275 in 20 years, considering 10% inflation rate. If you pick an investment such as equity, and assume the return...