Passive investing for long-term gains
- Buy and Hold is a long-term investment strategy that involves buying securities and holding them in your portfolio for a long time.
- Some investors say buy-and-hold investing is the best way to manage risk and achieve long-term financial goals.
- Opponents argue that you might get better results with a hands-on approach to your wallet. However, historical results generally favor a passive investment plan.
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We’ve all heard the saying: Good things happen to those who wait. This can be applied to investing, where you can choose to buy the shares of a company that you believe will be successful over time, with the expectation of long-term profits. This is called a buy and hold strategy.
What is the buy and hold strategy?
Buy-and-hold investing is a strategy in which passive investors buy an investment, such as a stock or mutual fund, and hold it for a long time despite changes in the market. Many famous investors, such as Benjamin Graham and Warren Buffett, are well-known fans of buy-and-hold investing.
Over a short period of time, financial markets tend to fluctuate. The prices of stocks and other assets rise and fall almost constantly during trading hours. Graham, the author of “The Intelligent Investor,” equates short-term buying and selling of stocks with gambling. He says that real investing takes place over a longer period of time.
Whether you manage your own portfolio or work with a trusted financial advisor, buy and hold investing is the best investment strategy for most people. If you’re investing for retirement or other goals in at least 10 years, buy-and-hold investing is a natural solution.
Should you try the buy and hold strategy?
The strong argument in favor of buy-and-hold investing is that over a long enough period of time, a well-run business should increase in value.
Buying and holding allows you to ride the waves and the noise of the markets and capture that gain in your wallet. For example, the average 10-year stock return is 9.2%.
But not all investors are fans. Some mutual funds are part of the group that can outperform the market, and advocates of actively managed funds say the greatest benefits can be seen in a bear market. This is something we haven’t known for a while.
The financial report
The buy and hold strategy is a form of passive investing, and it’s easy to see why it has become a must-have approach for most people.
Buying and selling stocks quickly can be exciting, but it’s also very risky. When your retirement and your future are on the line, you don’t want your wallet to look like a Las Vegas casino. If a slow but steady path to growing your wealth sounds appealing, buying and holding is probably the best investment strategy for you.