Why is the Buy and Hold Strategy the Most Winningest Strategy in the Market?

The buy and hold strategy has long been touted as the most winningest strategy in the stock market. It’s the strategy that generates the most returns in the long term. Why? Because many investors tend to make emotional decisions in the short-term (selling at inopportune times, etc.) and over the long-term good companies generates good returns for investors. The long-term goal of public companies is to generate a return for shareholders and in that regard good companies are typically successful in achieving that over the span of years and years. This also holds true with indices and ETFs. Over the years this strategy has better rates of return than most other strategies mostly because it’s a long-term approach. Timeframes become much easier to manage in the long term and it allows times for your investments to prosper.

Day Trading

Although many can find success with day trading strategies (with day trading you are typically trying to generate profit by buying stocks intraday and selling them before the market closes, it’s a more in-and-out approach where your avoiding overnight risk altogether), this strategy requires a lot of attention to detail and is highly time consuming. Day trading is a full-time job for many and this strategy requires a lot of time and knowledge, so it’s isn’t ideal for everyone. Day traders typically also have a significant passion for buying and selling that doesn’t always come naturally to some. This is why many day traders often lose out to buy and hold investors in the long term.

Swing & Trend Trading

There are many consumers who simply follow the path of least resistance and follow trendy stocks. The problem here is that this may work in the short term but trendy stocks can sometimes go out of style quicker than others and when that happens you might experience larger losses than normal. Those losses would be okay under a buy and hold strategy but not for trendy stocks that might not survive in the long term. Swing trading (a strategy where you buy a larger amount of stocks and typically sell them weeks or months later) also carries a lot of inherent risk and should be done with caution. It’s also quite time consuming when compared to buying and holding.

Less is More

As with many cases in life, less can often times be more. By just simply buying and holding onto your investments you are allowing them to flourish and grow. If there are similarly like-minded investors doing the same you might be onto a good investment and one that will bear fruits. The easiest strategy can often times be the best one.