Buy and Hold
Categories: Investing, Stocks, Index Funds, Managed Funds, Trading
Buy and Hold is a style of investing. Basically, you buy stocks and then hold them. Convoluted idea, we know.
Warren Buffett, the Big Cheese in the investing business, is a big believer in buy and hold. Stockbrokers are less excited about this strategy, because they make their money when people trade, sell, and buy stocks. If everyone held onto stocks, stockbrokers might make less and might have to wear last year's Tom Ford designs. Tragic.
To be successful at the buy and hold strategy, you will generally focus on putting just a few companies in your investment portfolio—fewer than 12 for most people. Then you avoid selling or trading those shares. To make money, though, you need to choose the "right" shares, and this is where things get tricky. What sort of business is around and profitable forever? Google and Apple might seem like sure bets now, but what happens 30 years (or more) down the line? Warren Buffet and others have found success by investing in things that people "always" buy—like Coca Cola.
One of the big advantages of the buy and hold strategy is that it gives stocks lots of time to grow in value. Another big plus is that you don't realize gains, which means you don't have to pay capital gains taxes to the IRS. The big drawback is that your stock portfolio is going to go through lots of ups and downs, which will seem extra scary because you only have a limited number of stocks. When it all tanks, you won't be selling. You'll just be sweating it out, hoping that prices head back up. If you need the money in the short term and your portfolio doesn't recover in time, you might panic. This is really a strategy for the young or youngish who are thinking about stashing money away for retirement or even their kids.
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Finance allah shmoop what is a buy and hold strategy
Your broker hates this You buy one stock and hold
it for twenty five years How is she ever going
to pay for her beach house when you pay her
no commissions Well that's her problem If you buy and
hold the right stock you'll have crushed it Making serious
bank had you bought ten grand worth of amazon after
it was cut in half following a typo wouldn't be
worth over ten million bucks today Shop around find another
next year by it Hold it live it so that
maybe in the course of three decades you've bought now
thirty stocks and you never sell or pay taxes well
it's that strategy in part that made warren buffett the
richest man in america and he's been up there for
a long time He picks one stock holds of forever
and just counts his dough and note When you buy
and hold the stock you don't realize a gain on
your taxes You keep everything it's very important when you
calculate financial returns That's nice work if you have the
brain and guts to put all your eggs in just
a small handful of baskets Picking the right stocks that
really work You gotta watch your step though When you
do that you know when i wind up with you
know egg on your face like the rest of us