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Ask a Fool: How Can I Find Stocks to Buy and Hold Forever?

By Matthew Frankel, CFP® - Updated Apr 28, 2017 at 2:13PM

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Here are a few simple steps you can take to find stocks you can hold until you retire (or even longer).

Q: I'm trying to find stocks for my IRA. How can I find stocks I can buy and hold forever?

First, I never suggest simply buying a stock and completely forgetting about it for years. It's always a good practice to occasionally check how each company that you're invested in is doing. This can be the simple act of reading quarterly earnings and annual reports, but it's still important to know what's going on.

Having said that, there are some steps you can take to craft a portfolio of low-maintenance stocks.

A good first step is to apply what I call the "50-year test." Ask yourself if you're 100% certain if the company's business will still be around in 50 years. For example, I like to invest in the banking and real estate sectors in my IRA. People will always need safe places to put their money, as well as physical structures to live in and conduct business in. Will they always need, say, action cameras? Maybe, but maybe not -- at least not as we know them now.

Once you're certain the industry passes the 50-year test, try to identify a sustainable competitive advantage that will keep the company's market share intact for years to come. As one example from my own portfolio, Realty Income (O 1.76%), which invests in freestanding retail properties, has a lower cost of capital and greater financial flexibility than its peers.

Finally, it's also a smart idea to look at the company's track record of earnings growth. Past performance is no guarantee of future results, but companies that have steadily grown for decades have better chances of doing the same in the future.

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Stocks Mentioned

Realty Income Corporation Stock Quote
Realty Income Corporation
O
$69.19 (1.76%) $1.20

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