How To Analyse Stocks For Long Term Investment?

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We book profit in stock in short periods with some points like Rs. 10 to Rs. 30, but sometimes we miss big opportunities in the same stock and later we thought if we could hold long. This article is for those new traders and investors who want to know how to analyse stocks for long term investment.

To analyze stocks for long term investment, you may need to have some basic understanding of Technical, Fundamental, and Sentimental, if you do not have a basic understanding no issue as it will be get cleared in this article.

Currently, we have many resources to find details about any stock hence the required data is available to us and we just need to understand that data at a good level.

Prepare a list of stocks that you are looking for long term investment and let’s see next how to analyse stocks for long term investment.

  1. Monitor The Stocks Daily.

    How To Analyse Stocks For Long Term Investment

    After you added some stocks to your watchlist, the very first thing that you should have to start to monitor those stocks on a daily basis to understand how the volume and stock price fluctuate on a daily basis.

    Avoid stocks on which the volume increase and decreased on frequent days like today they are up and the next day down, again up in the next couple of days and down in next day, such stocks can create a panic situation and may lose psychology and you end up with an unnecessary loss.

    Find a stock that has decent and standard movement on a daily basis, the volume is average until there is no big news in the stock. It is fine if the stock is not jumping every day but slow and decent movement stocks are always best as investing in such stocks our psychology gets maintained, we can able to focus, and get enough time to make a decision whether we want to stay in stock or not.

  2. Fundamental Analysis.

    How To Analyse Stocks For Long Term Investment

    After monitoring and selecting a stock that has decent movement and volume is average on a daily basis, next is to perform Fundamental analysis. Fundamental Analysis may look difficult for a few people, but here we will demonstrate it in an easy way, in fundamentals we can just check a few points to see how the stock is strong fundamentally.

    The best website to do fundamental analysis is Screener, this website almost gives everything that is needed to do fundamental analysis, and it’s 99% free to use.

    Go to Screener and search for the stock. At the very first, you will see what are the PROS and CONS which also help you to understand the stock, then for fundamentals, we will check the below 5 points.

    1) On the Top of the page, you will get the PE ratio, universally it is not mentioned anywhere what actually the good PE ratio to buy the stock, but many investors and traders consider a PE ratio between 10 to 25 to buy the stock, as such stock has potentials in future growth.

    2) Check Quarterly Results, here you will see Sales, Expenses, and Operating Profit. Make sure sales are always greater than Expenses accordingly Operating Profit is increasing every Quarter. One of the quarters result if the profit is minus then fine but it should have to be positive in next quarter. If Operating Profit is increasing consistently then the stock has good strength.

    3) Check Profit & Loss, similarly above for Quarterly Results, make sure sales are always greater than Expenses accordingly Operating Profit is increasing.

    4) Check the Balance Sheet, in this section, you just need to focus on Reserves and Borrowings. Reserves should be greater or constant but Borrowings should look like decreasing. If Borrowings is 0 that means the company does not have any loans it’s debt free, whatever profit comes from sales everything goes to the company.

    5) Check the Shareholding Pattern, here you need to check whether the Promoter’s Shareholding is constant, increasing, or decreasing. If Promoter’s Shareholding is constant then it’s fine, if it is increasing then a good sign as the stock may have future growth. However, if Promoter’s Shareholding is decreasing then it is a negative sign as the company promoter itself selling its stake, in this situation you can hold the decision.

    This way you can do a basic fundamental analysis and shortlist a good stock that fulfills all the above parameters.

    Once shortlisted a good stock according to the daily monitor and fundamentally good, still, based on these you will not take entry blindly as there is a proper time for Buying and selling which we will see next in Technical Analysis.

  3. Technical Analysis.

    How To Analyse Stocks For Long Term Investment

    Technical analysis is not always 100% accurate but it helps most to buy and sell stock at the correct time. There are multiple indicators and strategies available in technical analysis.

    Good indicators to analyze stocks for long term investment are the 200 Moving Average (MA), Support and Resistance, and Trend Line,

    200 Moving Average (MA): For the stock that just crossed 200 MA from below to up or is about to cross, this can be a good time to buy the stocks as there might be growth in stock due to which it crosses 200 MA.

    Stocks that are moving with 200 MA mean stock price coming down above the 200 MA level and bounce up just after touches to the 200 MA level or spend some time around the 200 MA level, such stocks can have good growth and can be bought once they come close to 200 MA level from the above side. To see how the stocks move with 200 MA please check Which Stocks To Buy For Long Term Investment as there are multiple examples given.

    Support: It is the level from where the stock previously bounced and went up, to find this support level, you may need to check the history of that stock price movement and you may find such a level in 1-week history or 1-month history. Once you find the Support level, wait till the price comes down at that level as it will be a safe level to buy stock because buyers are always seen at the support level.

    Trend Line: When a stock moves higher high movement in which it crossed the previous high and makes a new high, here we can draw a trend line by connecting each low point so that we will find a stock trend. When the stock price come close to Trend Line it will act as a support level and also a safe level to buy.

  4. Long Term Mind Set.

    How To Analyse Stocks For Long Term Investment

    In long term investment, we have to understand that sometimes the market may behave highly volatile in which stock may suddenly start falling and rising, we have to understand here that not only single stock but its a global situation in which all stocks are behaving like same, once the situation comes under control the stock may continue on its way.

    When your study, and analysis is done it is most important to fix the mindset that you have long term vision and not short term, and control emotions during a highly volatile market so that you will not get in a panic situation and take any wrong decisions.


We have seen what can be checked in how to analyse stocks for long term investment. Long term investing can give good wealth, however, continuous monitoring, a good level of analysis, self-trust, and patience are the main keys. Even though the stock is fundamentally good there is the proper time for buying as per the technical which need to be followed to avoid unnecessary panic situations, and finally, while long term investments we should have a long term vision.

See also  Nifty It | Nifty IT Index | An Overview of INDIA'S STOCK MARKET Leading IT Sector.

Frequently Asked Questions about How to Analyse Stocks For Long Term Investment.

Which analysis is best for long term investment?

There is no single level of analysis. You need to check the stock in all parameters of Fundamental and Technical which is the best analysis for long term investment.

How do you Analyse good stocks for long term?

Keep stock under monitoring and watch out for daily price movements to see whether it’s a standard movement. Check Quarters Result, Sales, Expenses, Operating Profit, Profit & Loss, Promoters Shareholding Pattern.

Which techniques are used to evaluate long term investment?

Fundamental Analysis and Technical Analysis, are common techniques used to evaluate long term investment.

Which free website is best for stock fundamental analysis?

Screener is 99% free and the best website for stock fundamental analysis. This website gives you almost everything which you need for stock fundamental analysis and is free.

What is the difference between fundamental analysis and technical analysis?

Fundamental analysis is used to see how a company is performing whether they are in profit or loss, Fundametal analysis is mostly used for long term investment. Technical analysis helps you to find the right time to buy and sell the stock, and it is used short term as well as long term.

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