On the fence regarding the buy and hold investment strategy?
One mainstay of long-term growth when it comes to investing is using the buy and hold investment strategy. The logic behind the approach? Purchase stock in a solid company and hold on to it for a longer period of time in order to turn a profit. Using this strategy, the average stock return you may see can range from 8 to 10 %, as long as the investment is given adequate time to mature. This investment strategy goes directly against a market timing strategy, when someone would buy and sell investments over short periods of time with the intent of purchasing low and selling high. Because of this difference, think of the buy and hold strategy as a conservative plan where investments spend “time in the market,” rather than “timing the market.”
Famous investor Warren Buffett is a longtime fan of the buy and hold investment strategy, advising others to not purchase an investment they wouldn’t want to hold on to for at least five years. And while the strategy does get criticism from some investors, study after study shows significant returns when an investment is held for a longer period of time. Let’s take a closer look at a long-term purchase from Coca-Cola to see the buy and hold strategy in action:
An investor buys stock in Coca-Cola in 1990 and holds onto it for twenty-five years (until 2015). During this timeframe, the stock experienced the recession from 1990-1992, the Great Recession from 2007-2009, plus a four year period when this particular stock fell (from 98-02). Even with all of this “negative” market activity, the investor would have seen almost 222% growth in the initial investment over this period.
Most criticism of the buy and hold strategy comes from a zero percent return rate that was seen in this strategy during the lost decade. But, if these investment professionals take a look at long-term growth patterns of the strategy, they would see a positive historical return rate.
Plus, the buy and hold strategy is just one investment approach you can take within your portfolio. And, if you spend adequate time researching solid, undervalued companies (and plan to hold onto the investment), you may be able to beat the market average return rate.
If you are considering this investment strategy when working with your independent financial broker, you might ask about past popular buy and hold stocks of the past. Some favorites include Apple, Google, Nike, JPMorgan Chase, Bank of America, Visa, Johnson & Johnson, and Sherwin-Williams, but your broker can share additional favorites with you. While some investors may see these as boring choices, you might view them as reliable money generators.
Finding the right stock for your goals and needs will be the most difficult aspect of buy and hold investing. This is where an independent financial broker can help you make the most out of your investments. Find out more about the pros and cons of this and other financial strategies by reaching out to an advisor at www.SummitBrokerage.com.
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Summit Brokerage Services is part of Cetera Financial Group. Summit Brokerage provides a broad range of securities brokerage and investment services to primarily individual investors. Summit Brokerage also sells insurance products, predominantly fixed and variable annuities and life insurance through its subsidiary, SBS Insurance Agency of Florida. Summit Brokerage also provides asset management services through its investment advisor, Summit Financial Group, Inc.
About Cetera Financial Group
Cetera Financial Group® (“Cetera”) is a leading network of independent retail broker-dealers empowering the delivery of objective financial planning advice to individuals, families and company retirement plans across the country through trusted financial advisors and financial institutions. Cetera is the second-largest independent financial advisor network in the nation by number of advisors, as well as a leading provider of retail services to the investment programs of banks and credit unions.
Through its multiple distinct firms, Cetera offers independent and institutions-based advisors the benefits of a large, established broker-dealer and registered investment adviser, while serving advisors and institutions in a way that is customized to their needs and aspirations. Independent financial advisor support resources offered through Cetera include award-winning wealth management and financial planning and advisory platforms, comprehensive broker-dealer and registered investment adviser services, practice management support and innovative technology. For more information, visit www.ceterafinancialgroup.com.
*”Cetera Financial Group” refers to the network of retail independent broker-dealers encompassing, among others, Cetera Advisors, Cetera Advisor Networks, Cetera Financial Institutions, Cetera Financial Specialists, First Allied Securities, Girard Securities, and Summit Brokerage Services.
All information herein has been prepared solely for informational purposes, and it is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy.
Content created by Summit Brokerage Services, Inc.