Avoid FOMO with stocks that are not GameStop: how I make long-term investments

Kirsteen Mackay resists the fear of missing out, and chooses long-term investments in stocks as a safer route to wealth.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

FOMO stands for ‘fear of missing out’. The financial markets have been rising on a tide of FOMO in recent weeks. It began with the GameStop mania that saw some retail investors going head to head with the hedge funds in a short squeeze. Now the excitement spreading across social media continues. This makes it easy to get caught up in the heady euphoria. But that’s just a short-term buzz, and I think long-term investments makes for a better strategy.

Choosing long-term investments

I think it’s possible to make money from the stock market by following a calm and strategic plan without getting caught up in any FOMO frenzy. Long-term investing provides a steady way to build wealth and gradually compound gains. This is easier if the stock pays dividends, but it’s also possible with regular investing in growth companies.

To find these potential investments, I have some criteria to look for. Firstly, I want to invest in companies that are well established. I want them to have a competitive edge and to offer something that means they’re still likely to be here far in the future. Then I check their financial state, keeping an eye out for red flags like too much debt or a pension deficit.

If all these boxes are ticked, then I look for a dividend and a low price-to-earnings ratio (P/E). In the current bull market, it’s hard to find stocks that meet all the criteria, but that doesn’t mean there aren’t gems out there.

Searching for long-term value

The pandemic has created a deep divide between quality stocks reaching high valuations and stocks with a less certain outlook being potentially undervalued. Some high prices make these stocks risky because they’re priced for perfection. So even slightly bad news could send the share price tumbling. Equally, some unloved stocks will ultimately fail. But between the expensive and cheap there are stocks I believe have a good way to climb.

For beginners to investing I think the FTSE 350 is generally considered a safer place to look for long-term investments than the FTSE AIM market. The companies in the FTSE 100 and FTSE 250 have to meet stricter requirements for listing, meaning they are more likely to be well established.

I think it’s important to create a diversified portfolio containing stocks from a variety of sectors. This mitigates risk. I also think it’s a good idea to invest regularly. By buying stocks monthly, I can build up my portfolio steadily. It also takes the stress out of trying to time the market. And is one way to offset the risk of buying too high before the market turns bearish.

I understand the thrill of a roller-coaster stock-picking ride. But for me, it makes more sense to approach my future with a logical strategy in mind. I’ll be avoiding the FOMO stocks like GameStop and focussing on a long-term investing strategy that builds wealth steadily.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Jumbo jet preparing to take off on a runway at sunset
Investing Articles

Down 70%+ since 2020, is IAG’s share price an unmissable bargain?

IAG’s share price is still down around 73% from its pre-Covid level, but with the business performing well last year,…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

£17,000 of shares in the FTSE 100 dividend giant can make me £18,874 every year in passive income!

This FTSE 100 dividend superstar has an 8.8% yield with dividends projected to rise. It looks very undervalued to me…

Read more »

Investing Articles

2 top UK growth stocks I’m buying for my Stocks and Shares ISA in July

Looking for UK-listed growth firms to add to a Stocks and Shares ISA? Our writer highlights two he's planning to…

Read more »

artificial intelligence investing algorithms
Investing Articles

This overvalued growth stock makes Nvidia look cheap!

ARM Holdings is a growth stock that’s benefitted from the AI rally. Muhammad Cheema takes a look at whether this…

Read more »

Investing Articles

1 penny stock I’d buy today while it’s 63p

This penny stock's down 70% since last March, yet could be set for a big comeback as the firm rebuilds…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

Buying 8,617 Legal & General shares would give me a stunning income of £1,840 a year

Legal & General shares offer one of the highest dividend yields on the entire FTSE 100. Harvey Jones wants to…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

£25k to invest? Here’s how I’d try to turn that into a second income of £12,578 a year!

If Harvey Jones had a lump sum to invest today he'd go flat out buying top FTSE 100 second income…

Read more »

Union Jack flag in a castle shaped sandcastle on a beautiful beach in brilliant sunshine
Investing Articles

2 lesser-known dividend stocks to consider this summer

Summer is here and global markets could be heading for a period of subdued trading. But our writer thinks there…

Read more »