10 Reasons Why Buy And Hold Is Not An Outdated Investment Strategy

Warren Buffet has said “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” This pretty much sums up the Buy and Hold strategy. It can be defined as perhaps the most straightforward, passive portfolio management strategy…

It requires investors to evaluate the investment possibilities to discover the best investment alternatives meeting their allowed risk requirements. The investor then makes long term purchases to build a diversified portfolio of assets, to hold and not to actively trade. There are many advantages to the Buy and Hold strategy for the long-term investor:

  1. Easy to understand.
  2. It is a consistent and disciplined method of investing.
  3. Forces the successful investor to have a thorough understanding of the fundamental quality of the investments and to be keenly selective.
  4. Minimizes the impact of market volatility.
  5. Avoids market timing errors and short term price movements.
  6. Recognizes the importance of dividend income in total returns.
  7. It is well suited for dollar-cost-averaging.
  8. Allows the investor to minimize the investment taxes:  capital gains are deferred into the future and  long-term gains are taxed at a lower rate
  9. Minimizes transaction costs.
  10. Does not preclude portfolio re-balancing when necessary.

If you have any questions, feel free to post your inquiries on our Facebook page.

Posted on August 18, 2014
Your trusted partner since 1985.