Skip to content

Buy and Hold Investing – Put Time on Your Side

June 28, 2012

“Buy and hold” investing — or buying with the intention of holding on to an investment for a long period of time — is the opposite of “market timing” — or trying to time your purchases and sales to correspond with the market’s fluctuations.  Investors who practice market timing try to identify the best times to be in the market and to be out of the market. This means they trade frequently, which increases the chances that they will miss out on the market’s most profitable periods.

The chart is based on an initial $10,000 investment and shows what missing the best days in the market could mean to you.  

Does the fact that investment prices aren’t stable but rise and fall mean that the longer you stay invested, the greater your chance of losing more of your money?

Historically, the answer is no. Take a look at this chart for a moment. It shows what happened to $10,000 invested in stocks for the past 20 years. If the full amount were left alone, it would have grown to $57,527. But if the investor missed the stock market’s five best days during that period, the $10,000 investment would have only grown to $38,176. And missing the 30 best days would have reduced the investment to $12,055.

 So, there are two points to think about. First, stocks and other investments rise and fall in price significantly during short periods of time. Second, as holding periods get longer, changes in the value of a portfolio typically become less pronounced.

Sweeten Wealth Management focuses on buy and hold investing / investing for the long term. 

Source: Standard and Poor’s.  For the 20-year period ended December 31,2010.  Stocks are represented by the S&P 500, an unmanaged index that is generally considered representative of the U.S. stock market.  Past Performance is not a guarantee of future results.  The S&P 500 is an unmanaged index that may not be invested into directly.

From → Recent Posts

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: