Buy And Hold… Forever
I see so many people get upset when the market invariably drops 300 points in a single day. We live in an age where people want instant gratification—we have microwave popcorn that takes only minutes, a VCR (or Tivo) so you never have to wait for a TV show, and the internet makes information like the lastest news instantly available. Waiting is for suckers!
So when the market drops, many people panic and begin to sell their shares, which only lock in your losses. However, the smart long-term investor knows that the perfect time to sell their shares is… never.
You may aks, “Why buy shares at all if you are not planning on selling them?” Unless you are going to live forever, you are correct—since you can’t take it with you, obviously you are going to want to sell some shares someday! Warren Buffet, widely regarded as the world’s most successful investor, has popularized the term “buy and hold foreverâ€. Critics are quick to point out exceptions to the mantra. For example, the Nasdaq market took a tumble in 1972 to 1974. It fell 60%. (Okay, 60% is more than a “tumble”). Critics have pointed out that it took until 1980, almost six years later, for the Nasdaq to break out.
But that’s my point: if you had sold out of your position in 1974, at the bottom, you would never have recovered your money. If you had bought and held “foreverâ€, you would eventually have recovered your money and went on to make some pretty significant gains over the next twenty years.
Let’s take that scenario and run with it: in theory, the “buy and hold†investor would have valued the Nasdaq as a “buy†in 1972 and bought a position. Then it tanked only weeks later. But instead of jumping off of a bridge, consider this. If you considered it a “buy†in 1972, it would have been a “screaming buy†in 1974, when it was selling at 60% off regular price. So, the “buy and hold†investor would have bought more (and not sold any). By 1980, the “buy and hold†investor would be considerably up as the difference between 1974 and 1980 would be positive 60%. The 1970s guy would have averaged his way to wealth.
Remember that investing is more than just buying a chunk of stock and locking it away in your attic for thirty years. It’s continually adding to your portfolio through disciplined investing, reevaluating and monitoring. “Buy and hold†doesn’t mean “under any circumstancesâ€, it just means a disciplined and patient approach to investing over the long run.
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I like the buy and hold… but I think forever doesn’t have to be in the equation as long as an investor has a set plan - I don’t sell just because shares drop a bunch if the same fundamentals are in place for the underlying company I’ve invested in.
BUT if the money can be better employed elsewhere, why wouldn’t I sell? I mainly invest for INCOME (why else would I want to own(invest) a(in a) business(stock)?
One thing I didn’t see you touch on is the tax advantages to the buy and hold forever and the way the money can grow through compound interest - the compound interest of the money that would have went to the government if you had sold over a period of thirty years of investing.
BUY AND HOLD FOREVER can be misleading to people as they may hold a company that ends up going through bad times (not talking about just some stock market correction where the price of the company’s stock will recover).
I like the BUY AND HOLD for as long as the company is fundamentally sound and the money can’t be better employed elsewhere. I guess I’m more of a fundamental investor than a daily chartist.
I don’t know about buy and hold forever, but the buy and hold strategy is becoming less frequent it seems, which is to me a very sad fact.
When I think of buy and hold forever I think simply Warren Buffet.
Buy and hold is good basic investing. It is probably one of the best most correct tips around. However, this is also one of the hardest to implement due to psychological aspects of investing.
Naturally buy and hold can not exist by itself and should be accompanied by proper diversification.
It’s not for me. I’d rather dump what’s going down and buy what’s going up. Anyone who held banking stocks the past six months would have done much better to dump them if only to get back in 3-6 months later - even if this isn’t the bottom for them yet. Some situations like that are just easy to see coming, once they start.
i had taken 1500 share @ rate 66.95 and 500 share @ 59.40 on firday ,29.02.2008. and the closing prise was 58.40 .wat should i do on monday?watwill be the expecting rate on monday.