The Buy, Hold, And Monitor Investment Strategy
The most famous strategy used to make money in the stock market is undoubtedly the buy and hold strategy. It’s not a bad strategy and a lot of people have made fortunes based on this strategy. However, does this method still work? Would it be advisable for a new investor to employ the buy and hold strategy? In reality, it doesn’t matter who you are, stock picking for beginners or seasoned investors is the same. After all, the goal for both is to make money.
In an age where we can trade stocks at the comfort of our own homes, it can be addicting to be a day trader. However, it is important to note that trading is different from actual investing. In trading, you might be holding a stock for a few days or even a few seconds. In investing, you should take a long term view as your end goal is to become a shareholder. At least, that’s how it should play out. More often than not, investors buy and sell without giving it much thought and often times, lose a bit of their capital investment. Not only that, they also lose some money in transaction fees as well. They have become a trader, and not an investor and that’s a whole different ball game.
So, when you want to be a buy and hold investor, you really do have to make long term stock picks. This means 5-10 years is your investment horizon. You should be comfortable with that scenario and you should also have money in the bank to give you a cushion on hard economic times so you’re not tempted to pull out. A lot of people actually do make good stock choices but due to unforeseen circumstances, they are forced to sell too early. So before you buy, make sure you can afford it.
Therefore, if you’re committed to staying with a company for the long term, you undoubtedly have to make the right call on which stock to buy. Obviously, this requires research. However, while you might have done good research, sometimes the picks do turn out to be duds without fault on your part. Perhaps the company is going a different direction from the business plan that they had laid out before. If this is the case, you need to monitor your portfolio. If this prompts you to sell, then sometimes you need to do so.
The buy and hold strategy still works to this day. However, the caveat being that you need to monitor your stock choices as well.
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