A buy and hold investor are better known for having long term investments – is probably the most common. Most people who have little training, or work with financial managers, are in this category. It requires the least amount of time and effort in the long run, after you’ve done your due diligence.
Basically what a buy hold investor does is find companies (stocks) they like and believe will bring value/dividends over a long period of time.
A good example of buy and hold is similar to real estate. Chances are when you buy a house or an investment property, you are betting that it’s going to increase in value. Or bring you a regular income. You wouldn’t buy the property for one day, you hold on to it for at least one year. This is exactly what buy and hold investors do. They buy the stocks (shares of a company) and sit out – especially through the tough times!
For people who are least interested in researching all the different sectors and companies, and for major diversification, mutual funds and ETFs are the most popular methods to own a stake in many different types of companies. Never put your eggs in one basket, and mutual funds or my favorite choice – ETFs, to some extent, do the diversifying for you.
One important note, when investing in mutual funds you are basically forced into the buy and hold mold. Most of the funds have time frames anywhere between three to five years. If you want to sell your shares of the fund beforehand, you will have to pay a fine.
ETF’s – which bring similar returns, if not better, don’t strap you into a timeline. You can buy and sell whenever you want without any fees.
Even if you chose the route of being a day trader, you will need to be a buy and hold trader as well. This is what is most recommended when working on your retirement portfolio and plan.
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