Defining a long-term investment in stock market.

For some “long term” would mean holding a stock position over weekend. For others, it may mean holding a security for at least 1 year for purpose of declaring a long-term capital gain, thus saving on taxes.

The rigid definition of a long-term investment in stock market would be holding a security for a minimum of 5 years, to as long as 30 years.

I’m going to tell you my definition of a long-term investment in a security by telling you a story. A true story!

My Mother worked as a teller in a small bank in Dover, New Jersey. The name of bank was called The Dover Community Bank. While working at bank (she eventually became a branch manager) she enrolled in bank’s dividend reinvestment plan, making purchases of stock through pay-roll deductions from her paycheck. She continued purchasing stock through years, having dividends from her shares in bank reinvested into more shares every quarter. By time she left bank (in early seventies) she had accumulated around 300 shares of The Dover Community Bank.

My Father, when he retired, had dividends from those shares sent home – to help ends meet. When my Dad passed away at age 80, my brother and I inherited over 7,600 shares of The Bank of New York, all originating from those 300 shares of what was once called The Dover Community Bank.

So, through this individual experience I have adopted my own opinion of what is called a long-term investment in a security. It is simply this – securities should be purchased with intent of providing dividend income to help ends meet during retirement, with understanding that no one can successfully retire without financial freedom. So every investment now in a security would be purchased with intent of holding that security (and adding to it during years) until dividend income from that security is ample enough to ease loss of income from retiring from my job. Now, I not only provide for myself during my retirement years, but will leave this earthly realm knowing that I will also be able to relieve some financial burdens for those I’ve left behind.

With this definite, concrete purpose for investing in mind, a definite, concrete plan would need to be created (and can be found in my book The Stockopoly Plan) to achieve this long-term investment goal. My Mother invested in only one stock and got lucky – a considered plan would diversify.

Each year as you live your life, proper choices would have you possessing a greater net worth at end of year than you had at beginning. What happens though, is you usually find yourself further in debt. The balances on your credit cards are higher. You bought a new car. You needed more toys for home.

This is not how you purchase your future. You pay all your bills, except for one. Your future does not submit an invoice; you never receive a statement. Even though it does not demand an interest payment, longer you give no heed to purchase of your future more it will cost you. Your future has no advocate, except you, you can’t continue to ignore it.

You gladly pay on debt, mostly for items that lose their value, or had none in beginning. These are payments which if properly directed could easily purchase your future and secure some peace of mind.

It is important to note some disturbing trends. Recent news stories point to large companies who are in trouble going to courts to eliminate need to fund retirement plans for their employees. Under-funding of pension plans has been a problem for years. The money simply will not be there when many are ready to begin drawing on it.

Then, recently Alan Greenspan, chairman of Federal Reserve Bank, said congress needed to get serious about cutting back Social Security and Medicare. Where does money for your future come from? Apparently not from there either.