Should I surf or invest in stocks for a long time?

I see many market analysts saying that stocks are a long-term investment, but a friend of mine has always said that this should be a long-term, long-term surfing channel just for land or buying gold. In fact, I see this friend making a lot of profit from the stock market, rarely complaining.

I plan to invest in stocks in the near future. Which school of investment should I choose?

Huynh Trung

Consultants:

First of all, we need to understand that investment is usually for long-term types, such as planting a tree, which cannot be reaped overnight, but it takes at least a few years. Accordingly, the opinion "stocks must be surfing, long-term for land or buying gold" is only partially correct.

With real estate, if you invest in a short period of time and make a profit or take profit with real transactions, you are in a favorable period, good liquidity of this market. Usually it takes 2-3 years for a property's value to grow well. Investing in gold will often benefit during periods of strong fluctuations in the world macro situation, investors everywhere will tend to "shelter" in this channel.

So what about stocks? Securities are the most liquid type of investment. If you hold stocks with good liquidity like Vinamilk, Hoa Phat or Vietcombank, closing your entire investment and cashing it into your bank account can take less than 5 minutes for the whole process. This is also the cause of the friend's argument in the story above.

When the market is growing well (uptrend), many investors like to buy and sell continuously to take profits. This is called short-term “surfing”. It is important that you have a lot of skills such as trading methods, stock selection skills, knowledge of asset allocation and movement, ability to manage emotions and many more. In fact, when entering a bull wave, about 80% of investors can make profits easily and it seems that the above friend was one of them.

Regarding the surfing school, when participating in the market, you need to be careful about the "driver" factor. They are groups with a large amount of capital, so they have the ability to manipulate stock prices to their liking, although not all stocks are affected by this situation. Stocks with poor internal fundamentals, or "cooking" financial statements to generate revenue, virtual profits to attract the attention of the market or push up stock prices rapidly, will create greedy psychology for investors. After pushing to a certain high price area, the "driver team" will discharge (sell a large amount of shares) causing damage to investors participating in the high price area. Therefore, you need to carefully study information about these stocks when choosing the above school.

Surfing can be profitable, but it should be noted that long-term investment also brings great results. If holding stocks like FPT, REE or HPG over the past 15 years, most investors can achieve 20-40 times growth in value. These are all amazing numbers. Similarly, billionaire Warren Buffett's investment in Coca-Cola has returned nearly 20 times its original value over 27 years. I think that the above interest rates are much more attractive than short-term surfing. But to pursue this strategy, you have to be really patient and choose your stocks carefully.

Good stocks can be classified by many criteria. This is a difficult form of knowledge and skills and investors in the market should be well trained. I have listed some important factors that you can refer to as follows.

Firstly, a good, long-standing company in the industry, for example HPG, VNM, FPT, PNJ... Second, the management is good, consistent and transparent with investors, which can be recognized through the annual general meeting of shareholders. Third, revenue and profit have grown well over the years. This is an important factor because businesses exist to bring benefits to shareholders. Fourth, healthy financial health, reflected in leverage indicators, ability to pay interest. This is important for business to develop sustainably. Besides, when considering stock selection, you need to pay attention to both the macro context and competitive advantages in the industry.

Stock investment is an attractive channel, helping to diversify investment portfolio. However, it is necessary to clearly determine from the beginning, whether you are investing or are you looking to become a trader – speculating who likes to surf.

One of the big mistakes that stock market participants make is turning a short-term, losing-surfing investment into a long-term investment. This is highly undesirable because the criteria and methods of stock selection of these two schools are very different. No one wants to hold a bad stock for long.

If you choose to follow the trend as a short-term trader, you should equip yourself with knowledge of technical analysis, risk management skills and emotion management. I think that emotion is the factor that pushes many traders to "go to the dead end" when letting it dominate.

If you choose to be a long-term investor, you should equip yourself with knowledge of macro analysis, skills in choosing an industry to invest in to suit the current context. Then you carefully select the best stocks in the industry. Valuing that stock is also an important skill and takes time and effort to master.

Khanh Nguyen

Head of Investment Consulting Department

at FIDT . Investment Consulting and Property Management Company