- Buy and hold
Buy and hold is a
long term investment strategybased on the concept that in the long run financial marketsgive a good rate of return despite periods of volatilityor decline. This viewpoint also holds that market timing, i.e. the concept that one can enter the market on the lows and sell on the highs, does not work or does not work for small investors so it is better to simply "buy and hold".
The antithesis of buy and hold is the concept of
day tradingin which money can be made in the short term if an individual tries to short on the peaks, and buy on the lows with greater money coming with greater volatility.
One of the strongest arguments for the "buy and hold" strategy is the
efficient market hypothesis(EMH): If every security is fairly valued at all times, then there is really no point to trade. Some take the buy and hold strategy to an extreme, advocating that you should never sell a security unless you need the money [http://www.efficientmarket.ca/article/Buy-And-Hold] .
Others have advocated buy and hold on purely cost-based grounds, without resort to the EMH. Costs such as
brokerageand bid/offer spreadare incurred on all transactions, and buy-and-hold involves the fewest transactions for a given amount invested in the market, all other things being equal. Warren Buffettis an example of a buy and hold advocate who has rejected the EMH in his writings.
Sell in May- an alternative strategy
* [http://www.efficientmarket.ca/article/Buy-And-Hold Never Sell: Buy and Hold Forever] (Efficient Market Canada, Investment Magazine)
* [http://www.fool.com/school/buyandhold.htm "The Buy and Hold Apocalypse"] :
* John Bogle, "Bogle on Mutual Funds: New Perspectives for the Intelligent Investor", Dell, 1994, ISBN 0-440-50682-4
* Mark T. Hebner, "Index Funds: The 12-Step Program for Active Investors", IFA Publishing, 2005, ISBN 0-976-80230-9
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hold — A process by which a bank restricts funds deposited by checks. Usually but not always used to restrict the proceeds of checks drawn on other banks until the funds have been transferred by the drawor s bank to an account that the depositor s bank… … Financial and business terms
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buy — To purchase an asset; taking a long position. Bloomberg Financial Dictionary bid (or buy) An offer to buy a specific quantity of a commodity at a stated price. The price that the market participants are willing to pay. Chicago Mercantile Exchange … Financial and business terms