You may see in many forms of media, blogs and forums, lot of skepticism, questioning and criticism of one of the favorite methods of investing called ‘buy and hold’.
As the title of this method implies, it is an investing method where an investor selects investment instruments, buys them at a suitable price and holds them for a long time before selling/realizing them.
Buy and hold sometimes also means that securities are not sold even when there is a fall in price and there is a prospect of loss of a short term nature.
Buy and hold does not imply buy and hold for ever or holding on regardless of the investment environment or objective.
It is a species of long-term investing which has many advantages with the caveat that it is done judiciously and with knowledge of the investing process required to achieve the best possible outcome.
To understand some of the criticisms voiced around buy and hold investing, lets try to distinguish between buy-hold investing and buy-hold process
Many people use the buy-hold process while dealing with many investments or financial instruments. That does not necessarily mean that such people do or understand buy and hold investing.
401K process or Mutual Funds buying is often cited as instances of buy and hold investing. Many critics seize upon these examples to pronounce the irrelevance of buy and hold investing.
401K process or Mutual Funds buying the way it is done whether in US or the rest of the world is more like entrusting your savings to your broker and letting him do it all for you. The difference is that the broker is a very big institution that is holding millions of similar accounts. Also while a participant in the 401K scheme or Mutual Fund thinks that he/she is into buy and hold or long term investing, the institution managing her money is most probably not.
Buy and hold investing is also not the same as 'buy and forget' investing which is apparently what many 401K and Mutual Funds participants are apparently doing.
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