The Basics of Long-Term Investing

The buy-and-hold attitude

Long-term investors are known for their buy-and-hold strategies. They choose investments carefully and believe they’ll be rewarded for holding them over the long term.

Long-term investors tend to pay less attention to short-term performance. They hold their investments through market ups and downs because the market has generally rewarded that strategy in the past. Past performance, however, doesn’t guarantee future results.

Long-term investors avoid market timing

The opposite of a buy-and-hold strategy — trying to predict short-term market movements and moving in and out of investments accordingly — is called market timing and is a trading strategy. Long-term investors believe staying invested is a better strategy than trying to predict the market and “Time in” the market, as opposed to “timing” the market is important. A trading strategy aims to profit from short-term price changes. These are usually quite small in comparison to long-term trend profits.

Of course, it would still be best to pick the best day to invest each year. This is very unlikely as no one can predict market movements.

The buy-and-hold strategy of the long-term investor requires the patience to wait out a bear market. Although past performance doesn’t guarantee future results, the long-term investment strategy has historically brought financial rewards to many investors.

Long-term investors evaluate their porfolio regularly

Typically, long-term investors will review their positions or meet with their financial advisor about once a year to evaluate their financial plan, investments, and progress toward their goals. If any particular investment is no longer in line with the investor’s time frame or if the risk level is making the investor uncomfortable, it may be time to sell all or part of some holdings.

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