Stock Market Today

The buy-and-hold  is said to be the most commonly used investment

strategy among individual investors. Many choose this method because of its simplicity – buying a stock and holding onto it, no matter how much the price rises or falls.

Buy-and-hold investors usually sell their stocks only when they have reached a certain goal such as making enough money for retirement, a college fund, or a house. Investors can buy a stock, hold onto it, and not have to worry about the right time to sell. Two additional benefits to the buy and hold strategy are that trading commissions can be reduced and taxes can be reduced or deferred by buying and selling less and holding longer.

The “buy and hold” approach to investing in stocks rests upon the assumption that in the long term (over the course of, say, 10 or more years) stock prices will go up, but the average investor doesn’t know what will happen tomorrow. Historical data from the past 40 years supports this claim. The logic behind

the idea is that in a capitalist society the economy will keep expanding, so profits will keep growing and both stock prices and stock dividends will increase as a result. There may be short term fluctuations, due to business cycles or rising inflation, but in the long term these will be smoothed out and the market as a whole will rise.

Market timing is an alternative to buying and holding. Market timers believe that it is possible to predict when the market, or certain stocks, will rise and fall. Does it therefore make sense to buy when the markets are low and to sell when they are high in order to maximize profits?