Buy and hold is an investment strategy where investors buy securities, such as stocks or bonds, and hold them for an extended period without frequent buying or selling. The strategy is based on the belief that over the long term, the value of the investments will appreciate, generating positive returns. It emphasizes patience, long-term perspective, and minimizing trading activity.
The goal of buying and holding is to benefit from the potential growth and compounding of investments over time, rather than trying to time market fluctuations or make quick profits. Buy and hold investors want to benefit from the overall upward trajectory of the market over time, even though there may be short-term fluctuations and market downturns along the way. Additionally, by minimizing trading activity, investors can reduce transaction costs, such as brokerage fees, and potentially mitigate the impact of taxes on capital gains.
Buy and hold investors often focus on fundamental analysis to identify quality investments with strong underlying fundamentals. They look for companies or assets with solid financials, competitive advantages, and sustainable growth prospects.
Although buy and hold investors hold investments for the long term, you should review your portfolio's performance periodically and make adjustments as needed. This can involve rebalancing the portfolio to maintain the desired asset allocation or making changes based on changes in personal circumstances or investment goals.