Is Buy And Hold The Best Strategy For An Individual Investor?
In this day and age of instant gratification, is “Buy And Hold” a good investment strategy? The answer is “It depends”. I know, this is taking the easy way out, but it really does depend on the individual investor.
The buy and hold strategy has several pluses and it is practiced exclusively by one of the greatest stock market investors of all times, Warren Buffet. Therefore, it can’t be all bad.
One big plus for the investor is you don’t have time to study the market, if you don’t have the time to study the charts, or you don’t have time to keep up with the news, then buy and hold is a great investment strategy for you.
Another big plus, you don’t have pay commissions for a lot of trades that eat into your profits.
Something that a lot people don’t consider is the tax benefits that come from buying and holding. It is much easier at tax time to only enter 3 or 4 trades instead of 300 to 400 trades.
The down side to the buy and hold strategy is when you try to hold on to your stocks during a bear market. You can find that a significant portion of your profits gets completely wiped out. For this reason, if you are going to utilize the buy and hold strategy, you should at least use trailing stops to preserve your gains (or more importantly, preserve your capital).
Don’t set the trailing stops too close or you will get closed out on a minor intraday correction, but don’t set them so far back that you lose a significant portion of your profits when the market has a major correction. You should also monitor your position on a regular basis to determine where the trailing stops should be placed.
The majority of the stocks used in the buy and hold strategy are the stogy old blue chips, for example, if you had bought Walmart when it first came out, you would be doing all right. However, for each Walmart there are hundreds of stocks that just barely stayed the same, you would have held on to them for minimal gain.
Another downside, most stocks tend to plateau or go down after a significant gain, so you end up holding a stock that is channeling and going nowhere. With some hands on application, your rate of return can be greatly improved. After all, the main reason you are investing is to make a return on your investment.
While I do think a portion of your portfolio should be placed in solid blue chip stocks that you tend to hold for a long period of time, I have never been a strong proponent of the buy and hold strategy. I just happen to think you can do better with a more active trading strategy. With that being said, if you plan to use a buy and hold strategy, you need to monitor your position and be prepared to get out when the market starts to go south.
The buy and hold strategy has several pluses and it is practiced exclusively by one of the greatest stock market investors of all times, Warren Buffet. Therefore, it can’t be all bad.
One big plus for the investor is you don’t have time to study the market, if you don’t have the time to study the charts, or you don’t have time to keep up with the news, then buy and hold is a great investment strategy for you.
Another big plus, you don’t have pay commissions for a lot of trades that eat into your profits.
Something that a lot people don’t consider is the tax benefits that come from buying and holding. It is much easier at tax time to only enter 3 or 4 trades instead of 300 to 400 trades.
The down side to the buy and hold strategy is when you try to hold on to your stocks during a bear market. You can find that a significant portion of your profits gets completely wiped out. For this reason, if you are going to utilize the buy and hold strategy, you should at least use trailing stops to preserve your gains (or more importantly, preserve your capital).
Don’t set the trailing stops too close or you will get closed out on a minor intraday correction, but don’t set them so far back that you lose a significant portion of your profits when the market has a major correction. You should also monitor your position on a regular basis to determine where the trailing stops should be placed.
The majority of the stocks used in the buy and hold strategy are the stogy old blue chips, for example, if you had bought Walmart when it first came out, you would be doing all right. However, for each Walmart there are hundreds of stocks that just barely stayed the same, you would have held on to them for minimal gain.
Another downside, most stocks tend to plateau or go down after a significant gain, so you end up holding a stock that is channeling and going nowhere. With some hands on application, your rate of return can be greatly improved. After all, the main reason you are investing is to make a return on your investment.
While I do think a portion of your portfolio should be placed in solid blue chip stocks that you tend to hold for a long period of time, I have never been a strong proponent of the buy and hold strategy. I just happen to think you can do better with a more active trading strategy. With that being said, if you plan to use a buy and hold strategy, you need to monitor your position and be prepared to get out when the market starts to go south.
In this day and age of instant gratification, is “Buy And Hold” a good investment strategy? The answer is “It depends”. I know, this is taking the easy way out, but it really does depend on the individual investor.
The buy and hold strategy has several pluses and it is practiced exclusively by one of the greatest stock market investors of all times, Warren Buffet. Therefore, it can’t be all bad.
One big plus for the investor is you don’t have time to study the market, if you don’t have the time to study the charts, or you don’t have time to keep up with the news, then buy and hold is a great investment strategy for you.
Another big plus, you don’t have pay commissions for a lot of trades that eat into your profits.
Something that a lot people don’t consider is the tax benefits that come from buying and holding. It is much easier at tax time to only enter 3 or 4 trades instead of 300 to 400 trades.
The down side to the buy and hold strategy is when you try to hold on to your stocks during a bear market. You can find that a significant portion of your profits gets completely wiped out. For this reason, if you are going to utilize the buy and hold strategy, you should at least use trailing stops to preserve your gains (or more importantly, preserve your capital).
Don’t set the trailing stops too close or you will get closed out on a minor intraday correction, but don’t set them so far back that you lose a significant portion of your profits when the market has a major correction. You should also monitor your position on a regular basis to determine where the trailing stops should be placed.
The majority of the stocks used in the buy and hold strategy are the stogy old blue chips, for example, if you had bought Walmart when it first came out, you would be doing all right. However, for each Walmart there are hundreds of stocks that just barely stayed the same, you would have held on to them for minimal gain.
Another downside, most stocks tend to plateau or go down after a significant gain, so you end up holding a stock that is channeling and going nowhere. With some hands on application, your rate of return can be greatly improved. After all, the main reason you are investing is to make a return on your investment.
While I do think a portion of your portfolio should be placed in solid blue chip stocks that you tend to hold for a long period of time, I have never been a strong proponent of the buy and hold strategy. I just happen to think you can do better with a more active trading strategy. With that being said, if you plan to use a buy and hold strategy, you need to monitor your position and be prepared to get out when the market starts to go south.
The buy and hold strategy has several pluses and it is practiced exclusively by one of the greatest stock market investors of all times, Warren Buffet. Therefore, it can’t be all bad.
One big plus for the investor is you don’t have time to study the market, if you don’t have the time to study the charts, or you don’t have time to keep up with the news, then buy and hold is a great investment strategy for you.
Another big plus, you don’t have pay commissions for a lot of trades that eat into your profits.
Something that a lot people don’t consider is the tax benefits that come from buying and holding. It is much easier at tax time to only enter 3 or 4 trades instead of 300 to 400 trades.
The down side to the buy and hold strategy is when you try to hold on to your stocks during a bear market. You can find that a significant portion of your profits gets completely wiped out. For this reason, if you are going to utilize the buy and hold strategy, you should at least use trailing stops to preserve your gains (or more importantly, preserve your capital).
Don’t set the trailing stops too close or you will get closed out on a minor intraday correction, but don’t set them so far back that you lose a significant portion of your profits when the market has a major correction. You should also monitor your position on a regular basis to determine where the trailing stops should be placed.
The majority of the stocks used in the buy and hold strategy are the stogy old blue chips, for example, if you had bought Walmart when it first came out, you would be doing all right. However, for each Walmart there are hundreds of stocks that just barely stayed the same, you would have held on to them for minimal gain.
Another downside, most stocks tend to plateau or go down after a significant gain, so you end up holding a stock that is channeling and going nowhere. With some hands on application, your rate of return can be greatly improved. After all, the main reason you are investing is to make a return on your investment.
While I do think a portion of your portfolio should be placed in solid blue chip stocks that you tend to hold for a long period of time, I have never been a strong proponent of the buy and hold strategy. I just happen to think you can do better with a more active trading strategy. With that being said, if you plan to use a buy and hold strategy, you need to monitor your position and be prepared to get out when the market starts to go south.
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2:42 AM
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