Buy and hold

Buy and hold is a strategy in which equities, once purchased, are retained for a long period of time. Short term market fluctuations are ignored. The advantages of this approach are investment costs are kept to a minimum and one is invested when the market appreciates. One study showed missing the 5 best days of a hypothetical $10,000 Invested in the S&P 500 from Jan 1,1980 – Sep 30, 2008 reduced one's return by 24%.

Buy and hold can apply to many investment styles, active or passive. If purchasing individual stocks, the companies selected for this strategy must not be cyclical, since the intention is to hold them for years or decades. This way of thinking is compatible with the Dividend growth investing strategy, with Low beta investing and perhaps with Value investing, but is the opposite of day trading or market timing.

Warren Buffet famously wrote in his 1988 letter to the shareholders of Berkshire Hathaway Inc: “In fact, when we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

Here is an example of how one portfolio manager selects his buy-and-hold stocks: