In a perfect world, I could buy a host of stocks and hold them for the next decade. In the real world, this isn’t always possible. Companies change, management moves on and consumer tastes evolve. However, there are still some businesses that have a strong long-term vision with a positive sector outlook. In fact, here’s one stock I’m considering buying and holding for the next decade.
An innovative financial services company
The stock in question is IG Group (LSE:IGG). It’s a FTSE 250-listed company that was formed back in 1974. Although originally it was offering just gold trading, this later expanded to more asset classes. Today, there are many stocks, currencies, bonds and other assets that can be traded on the IG online platform.
It specialises in offering leveraged trading, known as a spread bet. This allows retail investors to bet on whether a stock will go up or down, without actually having to buy the stock. The leverage can mean that the investor can make large profits with only a small deposit. However, the flip-side is also true, meaning that the potential for large losses is amplified.
The company has grown significantly in recent years, particularly regarding its retail client base. Interest in the stock market has risen since the start of the pandemic from the retail segment. This has allowed IG to open more accounts. With more accounts open and high volatility due to the pandemic, IG posted strong profits before tax of £450.3m in fiscal 2021.
A stock to buy for the long term
There are a few reasons why I think IG is a stock to buy for the next decade. One of the main ones is that I believe the trend of higher retail participation in markets will continue. High engagement, particularly for the younger age bracket, should help IG to continue generating revenue.
The company has also branched out to other wealth options in recent years, such as smart portfolios, ISAs and other lower-risk trading products. This should help clients to become ‘stickier’ if they can have more funds in one place.
Another reason I’d buy IG shares is for the income payout. The business has been paying dividends for many years with a healthy dividend yield. It currently sits at 5.39%. Given the strong history of dividend payments in the past, I’m confident that this can continue for the next decade.
Even though I’m bullish on the stock, there are risks involved. Spread betting is classified as gambling in the UK. In the past, IG has cut products as a pre-emptive measure, fearing tighter regulations. This was the case in 2017 when binary options were removed from the platform. If gambling rules are tightened in the future with respects to financial products, then this could negatively impact IG.
Another risk is that the business is really dependent on volatile markets. If stocks and currencies trade in tight ranges, then there’s little opportunity to make money from buying or selling. This isn’t a risk IG can do anything about, but it’s something I should be aware of.
Overall, I think that this is a stock to buy and hold for the next decade, and am considering buying the shares now.
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Jon Smith and The Motley Fool UK have no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.