Last Updated on Feb 12, 2024 by Anjali Chourasiya
Long-term investment in fundamentally strong stocks is like a wealth-generating machine. On the one hand, you invest in a company with robust prospects and strong qualitative features and financials. On the other hand, you reap the benefits of compounding. Together, these work like magic and can potentially garner handsome returns in the long run. In this article, let’s take a look at the best stocks for long-term investment.
Best stocks to buy in India for the long-term
|Market Cap (Rs. in cr.)
|Close Price (Rs.)
|5Y Avg Net Profit Margin (%)
|Power Grid Corporation of India Ltd
|Power Transmission & Distribution
|Adani Ports and Special Economic Zone Ltd
|Divi’s Laboratories Ltd
|Labs & Life Sciences Services
|FMCG – Tobacco
|Bajaj Finance Ltd
|HDFC Bank Ltd
|Tata Consultancy Services Ltd
|IT Services & Consulting
|Kotak Mahindra Bank Ltd
|Eicher Motors Ltd
|Trucks & Buses
|IT Services & Consulting
Note: The information is dated 12th February 2024. We have listed the 10 best stocks to buy in India for the long term based on the following parameters on the Tickertape Stock Screener.
- Stock Universe: Nifty 50
- 5Y Avg Net Profit Margin: Sort from highest to lowest
Details of top 3 stocks for long-term investment in India
Power Grid Corporation of India Ltd
Founded in 1989, Power Grid Corporation of India is the first stock in the list of the best share for long term investment. The large-cap stock is involved in the power transmission business with responsibility for planning, implementation, operation and maintenance of the Inter-State Transmission Systems.
- It has a 5-yr average cash flow margin of 69.06% and a total debt of Rs. 1,26,661.20 cr.
- Over the last 5 yrs, the revenue, current ratio and net income of the company decreased during the same period.
- The stock has profitability score of 9.2 out of 10 on the Tickertape Scorecard reflects the stock’s good signs of profitability and efficiency. However, it lags in financial growth in comparison to its peers.
Perform a thorough peer analysis and learn more about the stock here.
Adani Ports and Special Economic Zone Ltd
Large-cap company Adani Ports and Special Economic Zone is the largest commercial port operator in India, accounting for nearly one-fourth of the cargo movement in the country.
- The 5-yr average cash flow margin of the company is 52.29%, and the total debt is Rs. 53,136.41 cr.
- Over the last 5 yrs, a downward trend is seen in the stock for its free cash flow growth, debt-to-equity ratio, current ratio, revenue growth, and net income.
- As per the Tickertape Scorecard, the stock has no red flags. It shows good signs of profitability and efficiency, with a score of 8.6 out of 10.
Check out other essential scores for the stock before investing here.
Divi’s Laboratories Ltd
A large-cap pharmaceutical company, Divi’s Laboratories, was founded in 1990. It is into manufacturing and sale of active pharmaceutical ingredients (APIs) and Intermediates. Its products include Generic APIs, Intermediates, Peptide Building Blocks and Carotenoids.
- Divi’s Laboratories has a 5-yr average cash flow margin of 23.91% and a total debt of Rs. 3.26 cr.
- Over the last 5 yrs, the company’s net income, revenue, debt-to-equity ratio, and current ratio have been higher than its industry average. However, during the same period, the company’s free cash flow growth decreased than its industry average.
- The stock seems to be overvalued than its market average as per the Tickertape Scorecard. The stock lags in financial growth and has no red flags.
Click here to check other parameters of the stock’s financial performance.
A brief on the filters used to discover the top stocks for long-term investment
- Operating cash flow means the amount of cash generated by a company from its business operations (the revenue). It excludes costs associated with long-term capital investment. 5Y historical operating cash flow growth is expressed as the Compounded Annual Growth Rate (CAGR) of cash flow from operations over the last five financial years. The higher the number, the better it is.
- The net profit margin is expressed as the net profit or income as a percentage of revenue. It suggests how much of each rupee in revenue translates into profit. It helps understand whether a company is generating enough profit from its sales and also if its operating and overhead costs are under control. Therefore, it is an important indicator of a company’s financial health. 5yr average net profit margin gets an average of the net profit margin in the last five financial years. The higher the number, the better it is.
- Return on equity (ROE) is a measure of a company’s profitability and how efficiently it is generated. ROE is derived by dividing a company’s net income by its shareholders’ equity. A higher ROE suggests that the company is efficiently converting its equity into profits. So the higher the ROE, the better it is.
- Although debt helps raise funds to run a company, it adds to a company’s liability. Too much debt can impact the earnings and, worse, lead to bankruptcy or liquidation of the business in case it gets out of hand. Therefore, the lower the debt, the better it is.
Apart from these, you can also use other parameters like EPS and market cap to understand the company better.
Why invest in stocks for the long term?
The answer is – to reap the benefits of compounded growth.
To understand this, you will have to know the power of compounding. Only then can you appreciate the role of ‘time’ in multiplying your returns over the long term.
Compounding works just like the multiplier effect. When you invest in an avenue, at first, your principal or initial investment earns interest. Later, the interest portion, along with the initial investment, also earns interest. That is how your investment multiplies!
Here’s a simple numerical example to help you understand the power of compounding. Mr A invests Rs. 1 lakh in a 5-yr deposit that earns simple interest of 10% p.a. At the end of 5 yrs, their investment grows to Rs. 1.5 lakh. But Mr Z invests Rs. 1 lakh in a 5-yr deposit that earns a compound interest of 10% p.a. At the end of the tenure, Mr Z’s investment will have grown to Rs. 1.61 lakh. It means they will earn Rs. 11,000 more than Mr A.
This is why you should consider top stocks to buy for the long term in India.
How to choose stocks for long-term investment in India?
- If you want a short and sweet answer, then fundamental analysis it is. We have a detailed article on A Step-By-Step Guide to Fundamental Analysis. We highly encourage you to go through it – give your 14 minutes to read it and, in turn, better understand how to pick the best stocks for the long term.
- For now, we will discuss it in brief.
- The fundamental stock analysis means researching the underlying company’s fundamentals. Meaning business segments, products and services, historical financials, stock price trends, management, competitors, and so on.
- How do you evaluate quantitative factors such as financials? You can compare past financial statements and key financial ratios such as the PE ratio, net profit margin, debt level, and so on. Coming to competitors, you can do a peer analysis.
- Put together, these findings reveal how the company has performed so far and signal its potential performance. That way, you will be in a better place to decide whether a company is worth investing in or not.
- Fundamental analysis also means ascertaining whether a stock is fairly priced or not. We have yet another detailed article to help you understand why knowing the intrinsic value of a stock is important and how you can make sound investment decisions based on it. Read What Is the Intrinsic Value of a Stock and How To Calculate It?
Factors to consider when finding the best stocks to buy today in India for the long-term
- Look for companies that innovate. Since innovation allows companies to come up with better, future-proof products, it drives the company towards growth. A company that doesn’t innovate loses compared to the one that does.
- Identify companies whose products will remain relevant for a long time to come. Since long-term investment in stocks can mean staying invested for over 5 yrs, you would want to bet your money on a company that will still be operational in the years to come.
- Ensure that the company’s management is sound and skilled. People run a company, so the business’ growth can be impacted if they are incapable. Also, ensure that the management is ethical and that the company has good corporate governance. You would want to avoid companies like Satyam.
- Not all businesses have linear growth. Cyclical businesses like cement, auto, and sugar could incur losses at their cycle’s peak. Therefore, it is wise to be cautious when investing in such companies. Better still (for long-term investment), it makes sense to invest in safer companies that have displayed linear growth over time.
- Find out whether the company is transparent when it comes to disclosures. You would want to avoid businesses that don’t give proper and adequate disclosures, especially about related party transactions.
Advantages of investing in the best stocks for long term investment
- Compounding returns: Investing in the best stocks for the next 5 years can lead to significant compounding returns. As profits are reinvested, investors can earn returns on their returns, thereby potentially increasing their investment value exponentially over time.
- Dividend income: Many of the best long-term stocks offer the advantage of dividend payments. This can provide investors with a steady income stream, in addition to any capital gains from the increase in stock price.
- Reduced volatility: Long-term investments in the best shares to buy today for long term typically weather short-term market volatility better than short-term investments. Over time, markets have historically trended upwards, which can smooth out the bumps of short-term fluctuations.
- Benefit from economic growth: Investing in the best share to buy for long term allows investors to capitalize on economic growth. As economies expand, corporate earnings tend to increase, which can positively impact stock prices and investor returns.
- Opportunity for significant growth: Selecting the best share for long term investment offers the potential for significant growth. Companies with strong fundamentals and growth prospects can see their stock values increase considerably over the years.
Disadvantages of investing in stocks for long term investment
- Capital risk: Stock investments come with capital risk, as there’s always a possibility that the value of the best long term stocks can decline over time, especially if the selected companies do not perform as expected.
- Liquidity concerns: While stocks are generally considered liquid assets, investing with a long-term perspective may tie up capital that could be needed for unforeseen expenses. This is particularly true for investments in smaller, less liquid stocks.
- Opportunity cost: Investing in the best share for long term investment means locking in capital that could potentially earn higher returns elsewhere. This opportunity cost requires careful consideration, especially in rapidly changing markets.
- Market changes and disruptions: Long-term investments are susceptible to market changes and technological disruptions. Industries that seem promising today may be overtaken by new technologies or shifts in consumer preferences over time.
- Emotional stress: Holding onto investments through market ups and downs can be emotionally challenging. Watching the value of what you believed was the best share for long term investment fluctuate can test an investor’s patience and resilience.
Strategies for long term investment
Though long-term investment in stocks can benefit you in many ways, there are a few important rules you must consider before jumping right into it.
- Understanding the risk: Risk is an unavoidable factor. Hence, it is highly important to analyse and balance your risks throughout your portfolio. When you build your portfolio for the long term, consider taking the help of a professional for risk analysis.
- Picking a strategy that fits your needs: Knowing your risk profile can help you decide on the kind of stocks you want to invest in. As a result, curate a strategy that helps you multiply your profits while keeping in check your risk-tolerance levels. However, also keep in mind that no investment strategy works all the time. Hence, keep the long-term goals in mind and include diversification in your portfolio.
- Including diversification in your stock portfolio: A diversification strategy includes adding a variety of stocks/investment instruments to your portfolio that have different expected risks and returns. It may help you protect against events that might affect your portfolio and should still earn solid returns over the long term.
- Time horizon: One popular way of lowering your risk is by committing to your investments for longer. The longer the holding period is, the better your portfolio is able to sail through the ups and downs of the market. So, you can use time as a huge ally in your investing.
Although you have the list of best stocks for long-term investment that you can consider, do not take it as stock recommendations. A wise investor conducts their own research by evaluating the stocks in depth. Tickertape has comprehensive Stock Pages that host a wealth of information about the company profile, financials, peers’ information, holding, and more. Use them to pick the best stocks that suit your risk profile and investment requirements.
Once you shortlist the best stocks to buy in India for the long term, you can place buy orders for the same on Tickertape itself. All you have to do is add your desired stocks to the Basket and place a single buy order for all the stocks via the Transaction feature.
1. Which shares are best for the next 10 years?
When looking for shares to invest in with a horizon of 10-yr, it is important that the company’s product and services stay relevant for the years to come. Without a flourishing business, a company cannot stand tall.
Additionally, look for companies that are big on innovation, as it is the key to growth and prospects. Some other factors to look at are the management, governance, and financial situation of the business.
2. What is the safest stock to invest in the long term?
Stocks, in general, are risky. That said, large-cap stocks are considered less risky than mid and small-cap stocks. Besides, the Nifty 50 stocks are considered to be the 50 leaders in their respective sectors due to their consistently high performance. The market regards these as quality, blue-chip stocks with robust businesses.
However, it doesn’t mean that stocks are not good buys. Remember, investing in stocks is not free of risks. So, when looking for the best stocks to buy in India for the long term in 2023, taking a calculated risk based on your financial goals and investment horizon matters.
3. What are the top long term investment stocks?
The below-mentioned best long-term stocks are sorted using the Tickertape Stock Screener.
– Power Grid Corporation of India Ltd
– Adani Ports and Special Economic Zone Ltd
– Divi’s Laboratories Ltd
– ITC Ltd
– Bajaj Finance Ltd
– HDFC Bank Ltd
– Tata Consultancy Services Ltd
– Kotak Mahindra Bank Ltd
– Eicher Motors Ltd
– Infosys Ltd
These best stocks to buy for long term are from the Nifty 50 universe and are sorted using 5Y Net Profit Margin.
4. What are the factors to consider before investing in the best share for long term?
Before investing in long-term investment stocks, check the company’s financial health, including its profits and revenue growth. Look for a strong competitive edge in its industry, indicating growth potential. Consider market trends and how they affect these stocks. Also, a stable dividend history adds value over time. However, finding the best share for long term can be tricky. Hence, it is always worthwhile to consult a financial advisor before investing in the best long-term stocks.
5. What are the best stocks to buy in India?
Determining the best stocks to buy in India involves a meticulous analysis of market trends, company fundamentals, sectoral growth prospects, and the broader economic environment. It’s essential to recognize that the landscape of the stock market is dynamic, with various factors influencing the performance of stocks over time.
Because it’s a bit complicated, it’s a good idea to talk to a financial advisor if you are planning to invest in the best stocks for next 5 years. By adopting a strategic approach and seeking professional advice, investors can position themselves to achieve their investment goals and navigate the complexities of the stock market with greater confidence and insight.