Hold And Think Long Term

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Back to basics

Let’s go back to the simplest, yet one of the most underrated strategies in investing. The strategy of holding. Meaning, buying a quality stock, an ETF, or any solid asset and keeping it for a very long time. Because time spent in the market matters far more than trying to predict the market.

What holding means

The Buy and Hold approach is based on keeping a position regardless of short term moves. You don’t chase every swing. You don’t try to guess the next top or bottom. You invest and let time work in your favor.

This differs completely from active trading, which aims to buy low and sell high. In reality, very few people manage to do this consistently. Even experienced traders miss the strongest upward days because they keep trying to predict the next move. And those few strong days make all the difference.

Why it works

1. Strong long term returns

The S&P500 has delivered positive results in almost every 20 year period. No one has ever lost money by holding the index for at least 20 years. Even during crises, wars, and inflation waves, long term exposure pays off.

2. Avoiding emotional mistakes

The more trades you make, the more likely you act based on fear, greed, or FOMO. Most people who exit during a downturn re enter too late and miss the recovery. That leads to returns far below the market itself.

Studies show that while the S&P500 delivered about 9.65%, the average investor captured only around 6.81% during the same period because of poor timing.

3. The power of compounding and reinvesting dividends

When you hold investments, your gains generate more gains. If you reinvest dividends, growth becomes exponential. Each dividend buys more shares, and those shares produce even more dividends in the future.

4. Minimal costs

Every trade has a cost. Small or large, over twenty years these costs reduce your final return. A long term strategy keeps transaction expenses extremely low.

Time in the market vs Timing the market

Here’s a simple example.

Investor A: invests 10,000 euros in the S&P500 and holds for 20 years. With an average yearly return of 8%, the final amount becomes about 46,600 euros.

Investor B: tries to time the market. Misses only the 10 best days. Her return drops to around 4%. After 20 years, the 10,000 euros grow to just about 21,900 euros.

The first investor ends up with nearly double, without doing anything. Because the best market days often occur during periods of high volatility. Anyone who is out of the market misses them.

No need to guess the future. Staying invested is what matters.

This is why long term investing and continuous evaluation of fundamentals is essential for building sustainable wealth.

Posted Using INLEO