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How Effective Is Buy And Hold Strategy For You

by amitkheterpal

As an investor in the turbulent world of stock markets you always
will be tempted to sell your stock and book profits. That
strategy definitely works fine but you may lose out on further
upswing in the stock if the market is on an upswing. That is why
there are pros and cons to a buy and hold strategy.

If you ask any investor a beginner or a veteran they will have
conflicting views and opinion about this strategy. Then there is
one famous investor of this generation by the name of Warren
Buffett who has made billions on dollars just by using this buy
and hold strategy. That is not to say that there are others who
have made billions by just buying and selling in a very short
period of time.

The risks in general associated with the buy and hold strategy
are very less because in the long run say bout ten years or so
you will generally tend to make handsome returns on your
investment. The longer period allows you to tide over the losses
during the lean period.

The down side of this strategy is that you need to have enough
patience and good amount of capital to sustain patience for over
a period of a few years. That is a tough task to follow because
if buy a stock at market upswing time then you would be see
immediate profits and would like to sell the stock. Let us assume
that you get a 30% return in a matter of a month. That would be
more than sufficient return to sway any investor and get him to
sell his stock. But if you are a proponent of a buy and hold
strategy you would actually buy a stock which is worth many times
over in the long run. The 30% return will not be enough for you
to sell the stock. A long term investor knows that a particular
stock is worth say 800% over and that is why it is not prudent to
sell the stock now and wait for bigger profits. So it all depends
on the kind of returns you are expecting from the market apart
form the fact that you need to have patience to hold through a
longer period.

On the flip side there will be times when you are have losses on
your books and a short term investor will in general as a rule
try to limit his losses ad will exit the stock. Whereas a long
term investor will hold out knowing that this a temporary blip in
an otherwise uptrend stock.

So think hard and decide which strategy you want to go with and
select the stocks appropriately.

Amit suggests that as <a
href="http://stockmarketforbeginnersguide.com">stock market for
beginners</a> an investor should go outside help. He has a
resource on <a
href="http://stockmarketforbeginnersguide.com">stock market for
beginners lessons</a>  for new investors.

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