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

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »