Buy and hold traders, also called long-term traders, are stock market investors who are buying stocks and holding them for a long period of time. This category most likely constitutes the largest group of people who are buying stocks, as it requires the least amount of time spent focused on the stock market.
Many buy and hold traders believe the best way to have exposure to the stock market is to buy great companies and hold them through any market condition. When they buy stocks with the intention of holding them for years, they are more likely to steer clear of trendy companies or up-and-coming, high risk businesses.
Benefits of buy and hold trading
On the whole, for long-term investments, time spent in buy and hold trading is much less compared to time spent on medium- and short-term investments. Very long-term investment is not time-sensitive, while in shorter-term investment, you have to take timely action.
Being a passive, long-term investor has many advantages over other types of trading:
1. Fewer fees and commissions - Fees are often overlooked by traders. But when trading with small amounts of money, fees and commissions become even more important. Learning to control impulse trading and doing far less portfolio management may be the most profitable move a trader can make. Many believe that the big money in investing is made by diligent, long-term traders - buy and hold traders.
2. Low maintenance - Buy and hold traders are not required to spend a lot of time keeping track of the stock market daily movements. The practice of watching daily price movements is highly counterproductive to the temperament a long-term investor must maintain.
3. Less nerve-wracking - Companies that are typically chosen for buy and hold portfolios are less volatile than the average stock. Due to the lower volatility, there is less chance that a stock in a buy and hold trader’s portfolio will suddenly gap-up or gap-down overnight. The stock price fluctuations are more evident for the short-term trader - as buy and hold investors, time is on their side, and so if their stock goes down from where they bought it, they don’t have to worry as long as they still think the company is great.
4. Bonus for dividend growth investors - If they are dividend growth investors, there is an additional bonus to being a buy and hold investor. As the dividend rate continues to rise, their yield on cost will increase as well!
5. As the company grows, the dividends and bonuses are added to the net investment.
Many buy and hold traders believe the best way to have exposure to the stock market is to buy great companies and hold them through any market condition. When they buy stocks with the intention of holding them for years, they are more likely to steer clear of trendy companies or up-and-coming, high risk businesses.
Benefits of buy and hold trading
On the whole, for long-term investments, time spent in buy and hold trading is much less compared to time spent on medium- and short-term investments. Very long-term investment is not time-sensitive, while in shorter-term investment, you have to take timely action.
Being a passive, long-term investor has many advantages over other types of trading:
1. Fewer fees and commissions - Fees are often overlooked by traders. But when trading with small amounts of money, fees and commissions become even more important. Learning to control impulse trading and doing far less portfolio management may be the most profitable move a trader can make. Many believe that the big money in investing is made by diligent, long-term traders - buy and hold traders.
2. Low maintenance - Buy and hold traders are not required to spend a lot of time keeping track of the stock market daily movements. The practice of watching daily price movements is highly counterproductive to the temperament a long-term investor must maintain.
3. Less nerve-wracking - Companies that are typically chosen for buy and hold portfolios are less volatile than the average stock. Due to the lower volatility, there is less chance that a stock in a buy and hold trader’s portfolio will suddenly gap-up or gap-down overnight. The stock price fluctuations are more evident for the short-term trader - as buy and hold investors, time is on their side, and so if their stock goes down from where they bought it, they don’t have to worry as long as they still think the company is great.
4. Bonus for dividend growth investors - If they are dividend growth investors, there is an additional bonus to being a buy and hold investor. As the dividend rate continues to rise, their yield on cost will increase as well!
5. As the company grows, the dividends and bonuses are added to the net investment.
