Should You Invest In Just A Small Number Of Stocks?

A lot of investors spend hours on end searching through thousands of different shares in order to find potential investment opportunities. However it could be argued that a better strategy is simply to pick the biggest and most established companies and invest in them when the timing is right.

These types of companies include the big multi-national companies that are at the forefront of their industries and are likely to be in that position for many years to come. They will also generally have long periods of continued growth both in terms of dividends and profits. So in other words they should continue to grow in the years to come.

Once you have identified these companies then it's basically all a matter of timing. You should always invest for the very long-term in order to ride out any peaks and troughs, but even so it's still a much more profitable strategy to buy into these companies when they are temporarily weak. Even the strongest companies suffer share price falls at some point, often as a result of the wider market falls, so these moments present excellent buying opportunities.

Just because these companies are huge profitable companies does not necessarily mean that they are certain to continue growing in the years to come, but they are definitely more likely to do so than most of the smaller companies listed on the stock market. Indeed they will certainly help you to sleep easier at night than most companies out there.

So as I say a good investment strategy is simply to pick a handful of top quality companies that have long records of profit growth year after year, and buy when the share prices are temporarily weak. If you want to take this strategy one step further you can trade these shares as well to achieve short-term gains as well as long-term gains. For instance if one of your investments has gone up a lot and is looking overbought, at least in the short term, then you could still hold on to your initial shares, but open a short position to capitalize on any possible retracement which may occur. This is a popular strategy amongst long-term investors and helps to return a profit even when the wider markets are weak, or when their shares look like they have temporarily peaked.

Whichever strategy you adopt, the basic message I want to get across is that if you are stuck for investment ideas, then you could do a lot worse than simply choosing to invest in a handful of the best big-cap stock market listed companies. These companies are the ones that should still be turning over handsome profits in ten or twenty years time, and the ones that will usually deliver long-term profit growth and therefore handsome gains for their shareholders.

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