What is Buy and Hold Investment Strategy?

What is Buy and Hold Investment Strategy?

By Ansheed Raheem
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Buy and Hold Investment Strategy

This is a passive strategy that you must have heard about. Whenever an investor buys and holds a share for a longer period of time irrespective of market fluctuations it is a Buy and Hold investment strategy. This is a long vision financial strategy.

For example you might seen this thing in real life, in real estate business. Here an investor will spend his money to acquire a plot. The person will wait for a long period of time so that the land price will go high, because in the coming years the development will automatically rise the demand for land. This same trend is followed in share market too but the concerning factors are different.

Where can I use it?

If you are a share trader, you can purchase some shares of Blue Chip companies and use this strategy. But it should be necessary that the share price will rise along with time. This same strategy is very successful in real estate business.

Advantages of Buy and Hold Strategy

Both the active and passive investment strategy have their own valid points to argue. But let us see why buy and hold strategy is advantageous.

  • Tax Benefits- Long term equities have low tax rates compared to short term one.
  • Implementation easiness- This is an onetime selection process of stock, so a constant market watch is not needed, since the investment is meant for longtime
  • Efficiency- All kinds of fees involves in this strategy is low since there is minimum number of transactions once purchased.

Disadvantage’s

  • You need to have a big sum of capital to make this thing working. You cannot expect a return from this strategy in a short time.
  • Time period- long time period is one of the problems because the capital invested might have had a better return if used for something else.
  • Market Fall- This would have a devastating impact on market especially buy & hold strategy followers. Sometimes the invested money will also face a blackout if the market falls.

So always all strategies in the market has its own risk. But sometimes risk will be worth a gain.

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1 COMMENT

  1. A strategy where an investor buys and holds a share for a long tenure and then sold it at a price higher than its face value it is known as buy and hold investment strategy. But it is necessary to consider that the price of share must rise with time. It is easy to implement, enjoys tax benefits and efficient, but is highly risky because of the huge investment amount and long time period.

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