Buy and Hold
Buy and hold is a stock investing strategy that is probably as old as stock investing itself.
Just like many years ago when both Time Magazine and the New York Times decided God was Dead-many talking heads now consider Buy and Hold is Dead!
Before we do the autopsy, what is buy and hold?
Buy And Hold
Purchase a stock, or mutual fund after considerable study and then-nothing!
Let it sit and grow.
Now I don’t mean ignore your holdings. Review your holdings on a schedule. At a minimum of once per year.
Always have a list of those stocks that you want to buy-new ones or dollar cost averaging with your present holdings. Be ready for the dips in the market to add to your holdings at a good price.
What are the buy and hold is dead crowd crowing about? “Long live trading!”
Buy and Hold Problems
Buy and Hold Is Boring?
What are the knocks on buy and hold?
- People don’t hold, they get nervous and trade.
- With the rapid pace of change and new technology, companies are rising like the space shuttle one day, and falling like hail the next.
- Costs of trading has gone down.
- Loss of faith in the market.
If you are going to stop buying and holding, then what is left? Buying and selling. AKA Trading
Trading, not buy and hold
Why does buying and selling (trading) doom you to failure?
- Fees-every time you buy or sell there is a fee involved-doesn’t take long to add up.
- Emotions-there are reasons the market rises and falls week to week and month to month. And frequently it doesn’t have anything to do with reality of the company you bought.
- Lack of knowledge-trading stocks frequently means you have to have knowledge of many more stocks or funds. Turning your portfolio over frequently requires something to replace it with. Do you have the time to spend studying the stock market that much?
- Most traders use market timing, options, and selling the market short. Do you want to do this?
Buy and Hold
(with apologies to Shakespeare)
The talking heads say
buy and hold
Should be ignored
and given up for dead.
But I say
“Give me proof!”
They whine and complain
about the last 10 years
and their lack of gains.
Ignoring a century
while giving 10 years your focus
is like exchanging science
for hocus-pocus.
Buffett and Bogle-
They aren’t stupid.
Their billions are real.
Calling em out
is not too too cool.
As the masses shrill
the sky is falling
I want to yell
“wake up from your dream!”
To those who doubt
buy and hold wisdom:
Take a Valium
or something more drastic!
As for me,
I will continue to add
(with dollar cost averaging)
to my long-term portfolio.
Keep my expenses,
and taxes oh so low.
When I want to speculate
it will be with a small percent
of my gains.
My plan:
slooow and steady.
No race for me!
When the crowd yells “sell!”
I’ll be ready.
I’ll have plenty of cash,
To ring the crowd’s bell!
In summary, Buy and Hold isn’t dead. Buy and forget should never have lived. Buy stocks that have good value, monitor their progress, and remember it’s ok to sell.
Sell if you decide you made a mistake or the long-term value of the company changes.
Comments: What are your thoughts? Do you buy and hold? Do you buy options, and trade daily? Please let me know your reasons and success.
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Tags: buy and hold, buy and hold investing, is buy and hold investing dead, what is buy and hold investing
Buy and hold is still valid. With increased market volatility, and quicker business/economic cycles, perhaps the hold period isn’t the super long time it once was. However, it’s still a valid part of a longer-term strategy.
Many people treat investments like they’re at a casino. Not a way to build wealth in a strategic manner.
Also remember that transaction costs can eat into returns, another benefit of buying and holding. Totally agree that buy and forget isn’t a part of this equation.
The casino analogy is a good one.
I love the casino analogy, I have told my friends this same thing the last time we were in Vegas this past fall. The market is extremely volatile, and my investments are back and forth on the whim of the media, but Im holding on to profitable companies with low price/earnings ratios, and my dividend stocks since they have built in earnings for me.
http://www.moneyistheroot.com
Slow and Steady!
If there’s one thing we have learned the hard way, it’s that you had better figure out where your stop-loss point is as well as your profit margin and STICK WITH IT.
As stock prices rise, it’s so easy to become greedy for more! Then, before you know it, the stock takes a downward spiral, you sit back and wait on a comeback, only to watch those profits turn into losses.
SOME profit is better than a loss, so have a price target in mind and take it! An 8-10% loss is better than 50%, so cut your losses early and get out!
With that being said, I do agree that investing in a well-managed, financially sound company should be good for the long haul. That’s where it’s important to do your homework!
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