---
title: "The Buy and Hold Philosophy"
description: ""
canonical_url: https://trendshare.org/how-to-invest/buy-and-hold
markdown_url: https://trendshare.org/ai/buy-and-hold.md
published: 2011-08-26
last_updated: 2018-01-29
content_license: https://trendshare.org/about/disclaimer
---
# The Buy and Hold Philosophy

Source: https://trendshare.org/how-to-invest/buy-and-hold
Updated: 2018-01-29
Want to make a small fortune in the stock market? There's no [secret stock picking shortcut](https://trendshare.org/how-to-invest/is-there-a-secret-formula-to-pick-good-stocks). We're in this for years.

## What is Buy and Hold Investing?

That's good news, though—it's much easier to pick great stocks if you
have a long term plan. After all, any company that wants to stay in business
needs a good plan. It must invest in new products and improve its processes. It
must retain great employees and recruit new workers. It must continue to grow,
to bring in revenue year after year—not just [reliable earnings](https://trendshare.org/how-to-invest/earnings-matter-most) but [free cash](https://trendshare.org/how-to-invest/what-is-free-cash-flow).

Over time, these companies make themselves known.

How can you take advantage of this? Take a breath. Be patient. Pace
yourself. While day traders obsess over the second-by-second movements of
shares of companies you've never heard of, while commentators on television,
radio, and the Internet obsess over the meaning of a gain one day and a drop
the next, you can smile and sleep soundly. You have a secret weapon. *You
plan to buy and hold your share of great stocks for years.*

*Buy and hold investing* is finding great stocks, buying them at good
prices, and holding on to them forever, if possible. It's that easy to explain.
It's not easy in practice, until you achieve a patience around your
investing.

Think ahead three years. Which companies will be around? Which products will
sell? How about five years? Ten? What do people always buy, in good times and
in bad?

## Avoid Short-Term Thinking in Your Investments

[Markets fluctuate](https://trendshare.org/how-to-invest/what-happened-in-the-stock-market-today). Who
can predict them? Trying to time the best time to buy and the specific moment
to sell will drive you mad. Avoid that!

Plan in years, not days. Look for companies that are great today and will
continue to be great. There are no guarantees—who knows what the future
holds?—but invest in companies you understand. Invest in companies with
honest reporting and proven records of success. Invest when you believe your
dollars buy real value, when [the share price is a fair price](https://trendshare.org/how-to-invest/when-is-the-right-time-to-buy-a-stock)—when you've found the best shares to
buy for long-term investment.

In return, you'll own companies dedicated to building real wealth.

Other people track the agony and joy of daily dips and gains, but this will
free you to pay attention to the only numbers that matter: how are the
businesses doing?  How much money did they make? How much does each share
represent? Are their markets growing?

Ask yourself these questions every few months. An hour of review here and
there helps keep your plans on track. Keep the long view in mind and let the
days and minutes worry about their own troubles. Read any [list of common investing mistakes](https://www.investopedia.com/articles/stocks/07/beat_the_mistakes.asp) and you'll see "impatience".

## The Power of Long-Term Investing

Over those years, something amazing happens. That little piece of a great
company you own will pay you back many times over. Your initial research and
the minimal ongoing maintenance will build real wealth.

You'll have done it by finding great companies, buying their shares when
they're on sale, and letting good businesses do what they do best: earning
money through hard work, fair play, and honest free market capitalism. There's
no shortcut. You'll have to learn a few things. You'll have to roll up your
sleeves and do some research.

The result is more than wealth. You've owned businesses. You've understood
them. You've learned something and you've earned every penny of return. You
haven't agonized over the daily fluctuations of the market. You're not riding
[the roller coaster of horse-race stock reporting](https://trendshare.org/how-to-invest/why-does-the-media-cover-the-stock-market-so-poorly). You sleep soundly at night because
you know good businesses thrive.

## The Buy Philosophy versus the Trade Philosophy

The market has only two broad self-directed strategies. One always looks for
an edge, a quick hit, a piece of knowledge that no one else has yet. Time is
not on your side. You must get in and get out to take advantage of that tiny
piece of information before it expires.

The other philosophy acknowledges that it's too difficult and too risky to
attempt to squeeze every last possible penny of profit out of every trade. Good
businesses make good money, and if you buy their shares at fair prices, time is
on your side.

Maybe you have the advantage to find these tiny, ephemeral opportunities for
arbitrage. Maybe you have the stomach and the reflexes to click "Buy" at just
the right moment and "Sell" a few seconds later. Maybe you can sleep soundly at
night, never wondering if your automated trading program has a bug that could
cost you real money.

Alternately, you could buy great stocks and hold shares until you've reached
your long term goals. It takes less work than you think. Successful investment
is within your reach, a few minutes at a time, a few days a month. You have
everything you need to begin, right now. This is the moment you'll look back on
in five, ten, or twenty years: the moment you took control of your investment
destiny.