Buy and Hold

Buy-and-hold investors believe that, over long periods, markets tend to rise, and that trying to time short-term ups and downs is difficult and often counterproductive. They focus on choosing good investments and then letting them grow.

The strategy has several advantages. It keeps trading costs low, can reduce taxes by deferring capital gains, and helps investors avoid emotional decisions, such as panic selling during market falls or buying at the peak of a rally.

For example, an investor who bought a broad stock market index fund and held it for twenty years, through recessions and market crashes, would generally have done better than someone who repeatedly sold during downturns and bought back after recoveries, missing some of the market's best days.

Buy and hold does not mean ignoring investments completely. Periodic reviews and rebalancing help keep a portfolio aligned with the investor's goals and risk tolerance.

The strategy requires patience and the ability to tolerate large temporary losses. It works best with diversified investments; holding a single company's shares for decades carries the risk that the company declines or fails.