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The Buy & Hold Strategy


Let’s talk a little about stock investing.  There are many strategies when it comes to stocks and getting wealthy.  One of the oldest and most popular ones is the Buy & Hold Strategy.  This strategy is pretty simple.  All you have to do is buy some good stock from a reliable company and hold on to it for a very long time.  Seems simple enough, so why doesn’t everyone use this strategy?  I can help explain this by looking at the pros and cons of the Buy & Hold Strategy.

The Pros

One obvious pro of this strategy is its simplicity.  I am not saying it is simple to find the best companies, but once you find a great company, all you have to do is buy and hold the stock for a long time.  That’s easy!!!  Once the stock is purchased, this strategy takes little to no effort.  Also, since you are in it for the long run, you don’t need to sweat the ups and downs of the Market as you are holding on to your stock anyway.

It is also noted that buying an index fund of a diversified portfolio of stocks never lose money if they are held for 20 years or more.  The buying and holding of these types of stocks also outperform other investments like bonds or cash equivalents over the long run.  People who have purchased and held an index fund of the S&P500 have watched their money grow over the decades.

The Cons

One con of this strategy is that holding a stock that is losing value is not really ideal.  The thought is that you should sell when everyone is buying and buy when everyone is selling.  When you can do this successfully, you can make some really good money.  Though, you must know that timing the Market is very difficult.  This strategy also implies the price of the stock doesn’t matter.  Hasn’t price pretty much always mattered to us?

Some say that this passive method of buying and holding stock is not a good way to approach investing?  Being passive in life is generally not a good thing, so why be passive in investing?  Some argue that this passive approach isn’t smart.

Lastly, this approach can take a long time to build wealth.  Some people want to get rich quick, which hardly ever happens.  The Buy & Hold Strategy is a long play, and some see that as a huge disadvantage.

The Takeaway

The Buy & Hold Strategy is definitely a simple strategy that can help you become rich in the long run if you buy a good portfolio of diversified stocks and hold on to them for a long time.  Many have gotten rich this way.  The problem is that it takes a long time.  You could be more aggressive and avoid this strategy, trying to time the Market.  But timing the Market is incredibly difficult.  My thought is that if Harvard graduates who study financials can’t time the Market effectively, what makes me think I can?

Personally, I don’t have the time nor experience to study companies, follow stocks, and pick individual investments.  Could I learn if I tried?  Of course.  But this takes time too.  For this reason, I am a fan of the Buy & Hold Strategy.  I have a few index funds that I invest in for the long run.  I have chosen this approach because my money can passively grow over time with little effort.  I put the majority of effort and investment into myself and my business, as I see this a more solid investment that I know quite a bit more about.

You have to make the decision whether the Buy & Hold Strategy is the way to go for you or not.  I am NOT a financial advisor, so please take anything I have send in this post as for entertainment purposes only.  I just hope to provide other ways of looking at investing and spark some ideas in your mind.  Please follow up with your own financial advisor before you take on any new investing strategies.

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