Top 7 Long-Term Investment Strategies by CapitalVia

1. Magic Formula

The “Little book that beats the stock market” written by Joel Greenblatt's talks about value investment strategy. The books discuss about higher return on capital employed which leads to higher profit earning. Return on capital employed measures the profitability and efficiency of the company. This Neuron is built by applying the Magic formula as described in the book, with special emphasis being given on those stocks which are trading at reasonable price for long term portfolio.

2. Value Picks

Value investing is an investment strategy where stocks are selected that trade for less than their intrinsic values. It is generally seen that market overreacts to good and bad news, resulting in stock price movements that do not correspond with a company's long-term fundamentals, giving an opportunity to profit when the price is deflated. This value buying strategy-based stock selection gives good upside return potential in the long term. In Value Picks Neuron stocks are selected based on its intrinsic value, which is above its current market price.

3. Growth and Dividend

This Neuron is built based on investment criteria set out by Kevin Matras, an US based investment expert in his book "Finding #1 Stocks: Screening, Back testing and Time-Proven Strategies". Companies having high return on capital employed will be able to manage endurable earning growth. High return on capital employed with low debt/equity ratio leads to high return on equity which gives good return in stock market. In Growth and Dividend Neuron, stocks have been selected based on high return on equity in the same sector. Companies have been further screened based on its P/OCF (Price to Operating Cash Flow) instead of just PE ratio. High operating cash flows gives the company the ability to sustain earnings growth. In addition, we have selected dividend yielding stocks.

4. Peter Lynch

This Neuron is built based on investment criteria set out by the great investor - Peter Lynch, in his book "One up on Wall Street". Companies having high EPS growth in the recent years are expected to continue with a sustainable growth rate in future. Also, a low debt/equity ratio along with a higher interest coverage ratio leads to a high return on equity which gives good return in the stock market. In Peter Lynch Neuron, stocks have been selected based on high earnings growth, high operating cash flow growth, and their valuation multiples. Companies have been further screened based on its PEG Ratio (P/E Ratio to Growth Multiple), a multiple coined by Peter Lynch himself, as high growth companies continue to perform better even if they trade above their sectorial P/E Ratio.

5. Benjamin Graham

Benjamin Graham, also known as the “father of value investing” set out some important stock-picking criterion in his book “The Intelligent Investor”. This Neuron is built by applying the few criterions like Companies with low Debt / Equity Ratio and high “Earnings to Fixed Charges” ratio indicate long term solvency and the soundness of long-term financial policies of the company. Graham emphasizes the use of “price to book value” ratio for picking up undervalued companies which are showing future growth prospects in terms of Earnings as well as Cash Flows.

6. The Naked Traders

The Naked Traders Neuron is based on a book "The Naked Trader by Robbie Burns" which is a growth investing strategy. Stocks are exclusively selected on the basis of strong growth and earnings in the recent past. Other factors are also taken into consideration like the price momentum and value and focus on small and mid-cap stocks. High leverage companies are avoided in this selection process as it affects the profitability and return on equity of the company. Stocks are also screened on valuation parameters like PE, EV/EBITDA, P/BV ratio, so that reasonably priced stocks are selected.

7. The Buffet’s Way

Value investing is an investment tactic where stocks are selected which appear to trade for less than their intrinsic, or book values. Value investors actively seek out the stocks they believe the market has undervalued. Investors who use this strategy think the market overreacts to good and bad news, resulting in stock price movements which do not correspond to a company's long-term fundamentals. This overreaction gives the value investor an opportunity to profit buy stocks at a deflated price.

• Value investing came from a concept by Columbia Business School professors Benjamin Graham and David Dodd in 1934.
• Warren Buffet is perhaps the most well-known value investor.
• Studies have consistently found that value stocks outperform growth stocks and the market as a whole, over long-time horizons.

Undervalued stocks are thought to come about through investor irrationality. Value investors hope to profit from this sort of irrationality by investing in companies which may have any combination or one of the following:

• Below average price-to-book ratios
• Lower than average price-to-earnings (P/E) ratios
• Higher than average dividend yields

After a review, we as a value investor decided to purchase shares if the comparative value is attractive enough.

After a review, we as a value investor decided to purchase shares if the comparative value is attractive enough. Considering all these factors, we have prepared this Neuron where we have picked stocks which are below their Intrinsic Value i.e. undervalued stocks, and ultimately we have followed 3 basic rules of value investing, where we have picked stocks which are below industry average price-to-book value (P/B) ratios, lower than average price-to-earnings (P/E) ratios and higher than average dividend yields.

These are some of the best long-term investment strategies which can help you plan your long-term investment with low risk and minimum capital requirement of 200k. If you have not yet assessed your risk profile, it is recommended to get your risk profile analysis before investing.