Buy and Hold

What is Buy and Hold?

Buy and hold is a reflexive investment strategy wherein the investor purchases stocks (or other securities) and hold them for a longer period, irrespective of the Market fluctuations.

If you choose this strategy, you would have to actively choose investments without any concern for short-term movements and technical indicators.

Working of Buy and Hold

If you take the traditional Investing knowledge in mind, it delineates that with a long-term horizon, equities create a higher return in comparison to other asset products like Bonds. However, there is some confusion over if a buy and hold strategy is better than an active investing strategy.

While both these aspects have compelling arguments, but one of the buy and hold strategy advantages is that it provides more tax advantages as the investor gets the chance to concede Capital gains Taxes on the Basis of long-term investments.

To buy common stock shares is to get ownership of the company. The ownership comes with its own privileges that comprise a stake and voting rights in the corporate profits with the growth of the company.

Since shareholders’ number of votes is equal to the number of shares that they are holding, they will be functioning nothing less than the direct decision-makers. In case you become the shareholder of a company, you get to vote on essential issues like acquisitions and merges as well as electing a board of directors.

Instead of taking the ownership as a short-term aspect for profit in the Day Trader mode, as a buy and hold investor, you get to keep shares through bear and bull markets. Thus, equity owners will have to bear the failure risk or the highest profit of the appreciation.

Example of Buy and Hold

Talking about the example, let’s assume that you have purchased Apple stocks. If you buy 100 shares at the closing price of Rs. 20 per share in May 2020 and hold the stocks until May 2031, the stock would be climbed to Rs. 160 per share. There, you got the return of almost 900% in just 11 years.

The ones who are against this strategy basically claim that investors abandon profits by riding the Volatility out instead of locking gains and missing out on timing the stock market. Of course, there are professionals who gain regular success with short-term trading; however, risks are always higher.