What Is Buy and Hold?

Buy and hold is a passive investment strategy in which an investor buys stocks (or other types of securities such as ETFs) and holds them for a long period regardless of fluctuations in the market. An investor who uses a buy-and-hold strategy actively selects investments but has no concern for short-term price movements and technical indicators. Many legendary investors s𝓀uch as Warren Buffett and Jack Bogle praise the buy-and-hold approach as ideal for individuals seeking healthy long-term returns.

How Buy and Hold Works

Conventional investing wisdom shows that with a long time horizon, equities render a higher return than other 澳洲幸运5官方开奖结果体彩网:asset classes such as bonds. There is, however, some debate over whether a buy-and-hold strategy is superior to an 澳洲幸运5官方开奖结果体彩网:active investing strategy. 澳洲幸运5官方开奖结果体彩网:Both sides have valid arguments, but a ﷽buy-and-hol𒈔d strategy has tax benefits because the investor can defer capital gains taxes on long-term investments.

To purchase shares of common stock is to take ownership of a company. Ownership has its privileges, which include voting rights and a stake in corporate profits as the company grows. 澳洲幸运5官方开奖结果体彩网:Shareholders function as direct decision makers with their number of votes being equal to the number of shares they hold. Shareholders vote on critical issues, such as 澳洲幸运5官方开奖结果体彩网:mergers and acquisitions, and elect directors to the board. Activist investors with substantial holdings wield considerable influence over management ofteܫn seeking to gain representation on the board of directors.

Recognizing that change takes time, committed shareholders 澳洲幸运5官方开奖结果体彩网:adopt buy and hold strategies. Rather than treating ownership as a short-term vehicle for profit in the mode of a day trader, buy-and-hold investors keep shares through the bull and 澳洲幸运5官方开奖结果体彩网:bear markets. Equity owners thus bear the ultimate risk of failurᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚe or the supreme reward of substantial appreꦇciation.

Active Versus Passive Management

The debate over passive versus active management styles persists. A buy-and-hold investor reflects a 澳洲幸运5官方开奖结果体彩网:passive management style. In the case of a mutual fund or 澳洲幸运5官方开奖结果体彩网:exchange-traded fund, indexed portfolios mඣirr🐼or that of a common benchmark.

As indices rebalance and weightings increase relative to market capitalization, turnover rates, which are often under 5% among passive funds (such a𝐆s an S&P 500 Index portfolio), remain ultra-low as managers focus on issues across the broad market. Stocks are held for as long as they remain components of the indices.

Real World Example of Buy and Hold

An example of a buy-and-hold strategy that would have worked quite well is the purchase of Apple (AAPL) stock. If an investor had bought 100 shares&nbsᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚp;at its closing price of in January 2008 and held onto the stock until January 2019, the stock climbed to $157 per share. That’s a return of nearly 900% in just over 10 years.

Those arguing against using a long-term strategy claim that investors forsake gains by riding out volatility rather than locking in gains and miss out on timing the market. There are some professionals who regularly succeed with short-term trading strategies, but the risks can be higher. Investment success is also realized by loyalty, commitment to owner🎶ship and the simple pursuit of standing pat or not moving from a chosen position.