When you get into the stock market you are either going to be an active investor (trader) or a passive/long term investor. While many people do quite well ducking and dodging into and out of stocks, the far more favored tactic for long term success is the buy and hold strategy. While there are some who are quite adept at timing the market and buying and selling at just the right time, many serious investors are far more successful with a buy and hold strategy.
I don’t mean to misconstrue day trading as something that only the flippant investor does; in fact most of the best investors know when to get in and when to get out; no matter how short a period of time that may be. Still, serious investing involves doing a lot of tracking and watching and charting a stock before you commit capital. Buy and hold investors need to read their stock reports, find out all the information they can about a company, and find a good entry point so that they will be able to maximize their profits. Stocks do only two things; they go up or down. Most stocks are not so stagnant that they never move; even if a stock only moves a very small amount, movement is still present. Up could mean from .02 to $20 a share or more; that is an event which doesn’t happen all the time, but it happens enough to be mindful of it. Similarly down can mean down to zero; a stock will more often than not dance around in penny-land or sub-penny pricing before it actually will dissipate to nothing, but some stocks also go to zero, so as an investor you need to be prepared for that.
Being a buy and hold investor can also be maddening; it can seem like sometimes a stock which was rumored to be a big mover in the very near future will just sit dormant or even lose money! This can seem like the ultimate slap in the face because you’ve committed your capital and while you wait patiently for your money to do the work for you, you can see others making scores more money every day. If you truly believe in a stocks potential and the fundamentals (management, core principle, growth strategy, etc) haven’t changed, then you need to have patience or find a good exit point and get the heck out!
A buy and hold strategy is actually the time tested way of doing things; so long as your company has solid fundamentals and a product that people are willing to pay money for, investors will largely be rewarded over the long term. While buy and hold can also leave your money tied up with a bum investment over too long a time period that you may be comfortable with, buy and hold investing also saves you the headache of having to select a new company to plug your time and effort into researching. However nothing is worse than selling a position for a loss in a stock that you believed in right before a huge pop. It always happens that way so when you’re considering selling, consider just a little bit further before pulling the trigger and you may end up being richly rewarded!