When you open trading account you are eager to invest in different companies based on online trading course you get from traditional experts. Remember, most brokers and financial consultants want you to invest in companies that offer them higher margin. Study the market, do your own research before making investments. Stop investing in managed mutual funds and start investing in index mutual funds or index exchange traded Funds. Stay invested for long term basis into an index fund in BSE index or NSE index.
Smart Funds Investment
Same strategy must be applied in buy-hold stocks. If you want to buy-and-hold, then buy-and-hold index. Use index ETFs for easy entries and exits when needed, even intraday. Never buy a mutual fund with a load fee. Stop subsidising mutual fund manager’s lifestyles with managed funds and focus on investing in your own lifestyle. You are not earning money to fulfill monthly target of mutual fund managers especially those who make tall claims and when it boomerangs they blame the market conditions. Top 5 index funds in India hovered around 16% return as compared to last financial year.
Don’t Buy-and-Hold for Bears and Market Crashes
The buy-and-hold investing strategy is a commit to investment on the stock market going up over the long term. During the end of millennia, the Indian stock market returned an average of about 12% a year, so there were plenty of reasons to party when it was 1999. Buy-and-hold was considered the master mind strategy and all pullbacks were just buying opportunities. This was even more true in the 1990’s because that decade returned about 16% a year on average, and the 1980’s returned over 11% a year on average. Both the decades due to emergence of heavy bull traders and tech boom in the world. Buy and hold strategy is good for serious and patient investors who stay invested irrespective of bears and market crashes.
Buy and Hold Long Term Investment
Buy-and-hold investing looks great in hindsight. Long term, the stock market always bounces back and all stock market miscalculated investments are compensated if you hold a diversified basket of growth stocks, value stocks, income producing, and international stocks. The idea is that you buy them at any time and hold them until you retire. Is it really that easy? The problem is timing and investor emotions.
Buy and Hold as a Retirement Plan
Buy-and-hold is a trend following trading system for stocks in trading account. Your entry signal is anytime and all the time. Your exit signal is when you approach retirement and start to diversify into bonds, or pull out your money from stocks for living expenses. This is a system that buys and sells based on the premise that stocks will always go up over long periods of time because of the growth in the market based on new companies that create new technology, purchasing power due to continuous population expansion.
Buy and Hold Disadvantages
Buy-and-hold advice would have been just to hold on, it will work out in the long run, and stocks always go back up. That would have been a ride that few professional money managers could withstand, much less the average investor. The problem with buy-and-hold is that we have a limited amount of time to make our returns. And this is one of the major disadvantages of buy-hold strategy. When we are fortunate enough to participate in a bull market, we have to have a process for locking in those gains in the short term and wait for the next bull run.
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