There are two approaches to successful long-term investing. The first is making rapid decisions on a day-by-day basis, quickly getting in and out of positions for quick gains over and over again, with the premise that each gain will add up over time to lead to big profits. The second approach, and the one we will focus on in this article, is to buy shares of solid companies that will be strong players for years to come and holding on to them for the long haul.
The idea is that as the overall market moves higher and lower, so will pretty much every stock. You will never find a stock that avoids selling pressure at some point in its history, but over an extended period of time, the markets always tend to trend higher as more and more money flows in. Based on this concept, if you can find five stocks that are leaders in their sectors, and are in sectors that are expected to remain strong in the future, you can pinpoint five stocks that will trend higher over the long-term, and at least keep pace with the overall market.
The one principle that we have to be sure to respect before suggesting just five stocks to own forever is that of diversity. There is no way you would want to use five stocks from the same sector, and in fact, if you are just dealing with five stocks you should probably make sure that each of the five companies operate in different sectors in order to keep a decent level of diversity in your portfolio.
Sectors that come to mind when you think of those which have expected longevity include technology, finance, food, healthcare, and energy. You can easily argue that each of these five sectors will play an important role in day-to-day life for decades to come.
While it is true that there are plenty of sectors that will also be of importance moving forward, such as defense and auto, I would argue that the above five play the most important roles in our day-to-day lives and therefore have the best chance of keeping pace with the broader market.
Working off those five sectors mentioned above, I have come up with a list of five stocks that I believe are the only five stocks you ever need to own.