Buy and hold investing is an investment strategy commonly favored by long-term investors. Once the most common investment strategy, buy and hold investing refers to buying an investment vehicle, like stocks, with the intention of holding it for many years in the belief that its price will appreciate significantly. A long-term investor believes that by choosing investments that are good values, they will profit in the long-run, despite shorter-term stock price fluctuations. Long term investors will also look towards owning stocks that pay reasonable quarterly dividends.
Drawbacks of Buy and Hold Investing
Buy and hold investing as an investment strategy came under fire during the 2008 financial crisis as a result of the fact that many stocks lost all positive returns if tracked over the course of the decade that ended in 2008. A long-term investor who put his capital into even the most reputable companies, did not realize any profit by holding these stocks for those 10 years. This sparked many claims that buy and hold investing had become an obsolete investment strategy.
Value Investing and Growth Stocks
Historically, as the economy and stock market recovers, long-term investors using the buy and hold investment strategy ride out fluctuations if their time horizon is long enough. Those who have defended buy and hold investing point out that it has been a solid investment strategy for decades, and many long-term investors have benefited from using it. These proponents of buy and hold investing, point out that every investment strategy will fall on hard times upon occasion, especially in cyclical sectors. A long-term investor is more likely to have success if they have the patience to stick with their discipline and not try to time the stock market.