What Is Buy and Hold?
Buy and hold means buying good investments and keeping them for many years, ignoring short-term ups and downs.
Why it works
- Markets have risen over long periods despite many crashes.
- Fewer trades mean lower fees and, in the US, lower taxes on long-term gains.
- It avoids the common mistake of selling in panic and buying in excitement.
- It gives compounding time to work.
The hard part
Sitting still while your investments fall 30% is emotionally tough. Buy and hold only works if you truly hold through a bear market.
Hold the right things
Holding a broad index fund for decades has worked well historically. Holding a single company forever is riskier, because businesses can decline. Check in on your holdings, but do not trade on every headline.
See it in real companies
Open a company to see what it sells and how it makes money.
Related terms
Passive vs active investingCopying the market versus trying to beat it.
Compound interestGrowth that earns more growth.
Dollar-cost averagingInvesting the same amount on a regular schedule.
Day tradingBuying and selling within the same day.
Index fundA fund that copies a market index.
Capital gains taxTax on the profit when you sell.