Buy and hold is a passive investment strategy in which an investor buys stocks (or other types of securities such as ETFs) and holds them for a long period regardless of fluctuations in the market. An investor who uses a buy-and-hold strategy actively selects investments but has no concern for short-term price movements and technical indicators. Many legendary investors such as Warren Buffett and Jack Bogle praise the buy-and-hold approach as ideal for individuals seeking healthy long-term returns.
KEY TAKEAWAYS
- Buy and hold is a long-term passive strategy where investors keep a relatively stable portfolio over time, regardless of short-term fluctuations.
- Buy and hold investors tend to outperform active management, on average, over longer time horizons and after fees, and they can typically defer capital gains taxes.
- Critics, however, argue that buy-and-hold investors may not sell at optimal times.