Tuesday, February 5, 2008

Buy and Hold

Investing is not a short-term activity. The object is to grow your money. The longer you have it invested, the larger your potential returns.

The basic rule is buy low, sell high. However, it really should be buy low, hold... sell high.

In the short term, stocks go up and stocks go down. Profits change, the economy changes, political events happen; you cannot predict what will happen in the short term. However, in the long time, the stock of a good company will go up. So invest for the long term, and you will not be in danger of short term volatility.

In addition to riding out short-term fluctuations in the market, you will save money in long-term capital gains taxes if you hold on to a stock for at least one year. However, if you are investing in stocks, then you should be in it for at least five to ten years.

Buy stocks of good companies, and hold them.

No comments: