The advent of online discount brokers has made trading stocks very tempting. Buy a stock today and if you read a bad opinion of the stock tomorrow, you can sell it easily and cheaply. The fact that it has gotten cheaper to buy stocks is great….but the temptation to turn them over quickly isn’t.
You see, ever since I bought my first stock in my 20’s, my strategy has been to buy and hold for the long term. I am investing for the long haul which in my case means retirement. I have always wanted to make sure I built up my savings so I could lead a comfortable life in my 60’s. I would like to be able to do what I want to do and go where I want to go (within reason), not being constantly restrained by a lack of money.
The stock market is the way I hope to reach that goal.
I believe too many people treat the market like some sort of casino game: Place bets, wait awhile, and then cash out and on to the next stock. As I just mentioned, it is very easy to invest like that in today’s environment. But the reality is that buying and selling stocks on a frequent basis is something very few people can do profitably. Here’s why:
1) The first reason why it is hard to make money that way involves the fees. Even though it might cost only $10 or less on each transaction, those fees will add up significantly over time.
2) Another reason is that a person who makes lots of trades will inevitably be paying more in taxes: short term capital gain tax rates are usually higher (depends on what your income is) than long term capital gain rates.
3) Finally, trying to time the market and stocks is akin to telling the future. How many people can accurately do that? Not many!
I Look For Good Stocks I Can Hold
Many of the stocks I own in my other portfolios (I also have accounts at E*Trade and Merrill Lynch) were purchased 2 years ago or longer. Very rarely do I buy a stock with the purpose of selling it soon. I’m always trying to find companies that are solid earners, undervalued, and ones that should continue growing for many years to come. Thats what I am looking for as I search for stocks that can stay in my portfolio for a good while.
Of course there are occasions where shortly after buying a stock something could happen that might change my opinion and I decide to sell. However, my intent is almost always to find stocks that I will be happy to hold for at least a couple of years and maybe longer.
My stock investment strategy is to buy and hold stocks, not trade them. Even though it might not be as cool today as it was in years past to invest that way, I believe it is the single best strategy to grow your savings over time.