How finance folk use it
Buy and hold is a passive investment strategy for securities. As the name suggests, investors buy them and hold on for a long period of time, hoping that the value will go up in the long term.
Is it good or bad?
Investors who do buy and hold aren’t concerned with short-term price movements. For them, what matters is that the value of their investments will go up in the long term.
Historically, securities have given higher returns than other asset classes if the time horizon is long. This gives the strategy good potential, especially if you’re able to ignore sudden price drops or spikes.
This doesn’t mean, of course, that the buy-and-hold strategy is the only way to go. Short-term trading can also give you good returns, and allows you to lock in your gains and time the market.
What it means for you
Your choice of investment strategy is directly affected by your risk appetite and your time horizon. If you’re considering getting into equities and you’re willing to stay invested for a long period of time, buy and hold might be a good strategy to follow.
Remember, though, that you’ll have to be able to withstand the temptation to react to market changes, even if they are huge price movements.
As with any type of investment strategy, doing buy and hold does not guarantee that you will make money when you reach your time horizon.
