A:

Buy and hold refers to an investing strategy practiced favorably by passive investors (or couch-potato investors). When buying and holding, the investor usually ignores the day-to-day and maybe even month-to-month fluctuations in the stock's price. The investor lets his or her money increase with the growth of the overall market, which, over the long term, tends to increase consistently.

In contrast to a buy-and-hold strategy, active investing attempts to profit from shorter-term price movements that typically last less than one year. Keep in mind, however, that even though long-term holding is typically more than five years, the meaning of "short term" and "long term" is not absolute or fixed. Active investors sell stock mostly according to what's currently happening in the stock market.

It's also important to remember that a buy-and-hold strategy works best when you've done all the proper research to ensure that you buy a high-quality company. It's a gamble to buy stock randomly without doing the proper research.

To learn more about buy-and-hold practices, check out How Portfolio Laziness Pays Off.

RELATED FAQS
  1. Can I still make money with a couch-potato portfolio?

    The couch-potato portfolio is an indexing investment strategy that requires only yearly monitoring by an investor. An investor ... Read Answer >>
  2. What is the difference between passive and active portfolio management?

    Understand the difference between active portfolio management and passive portfolio management, and how each strategy benefits ... Read Answer >>
Related Articles
  1. Investing

    Why It Pays To Be A Lazy Investor

    Be a couch potato! This passive, but diversified, investing strategy could be for you.
  2. Investing

    Equity Investing For The Buy-And-Holder

    The buy-and-hold investment strategy requires investors to disregard their emotional responses to market movements.
  3. Investing

    Active or Passive Investing? What's Best for You

    Be strategic about which of these investing strategies you follow (and when).
  4. Investing

    Why Buffett's Buy-And-Hold Strategy Is Losing Its Appeal

    The Oracle's tried-and-true method may no longer be the top way to trade.
  5. Managing Wealth

    Why Blue Chip Stocks Are Key to Buy-and Hold Investing

    Several blue chip stocks have proven that buy-and-hold investing still works, even after the huge declines of the Great Recession.
  6. Investing

    Buy-And-Hold Investing Vs. Market Timing

    If volatility and emotion are removed, passive, long-term investing comes out on top.
  7. Investing

    Know When To Buy & Hold It, Know When To Fold It

    A passive buy-and-hold strategy using ETFs is one of the most efficient ways of building a portfolio.
  8. Insights

    Don't Panic When the Market Goes Up and Down

    Investing is not a month-to-month proposition. Here's why you need to consider the long term.
  9. Retirement

    Is Passive Investing Effective for Retirement Savings?

    Learn about the differences between active and passive investing for those approaching retirement. Discover how passive investing is gaining popularity.
RELATED TERMS
  1. Buy And Hold

    A passive investment strategy in which an investor buys stocks ...
  2. Hold

    An analyst's recommendation to neither buy nor sell a security. ...
  3. Conservative Growth

    An investment strategy that aims to grow invested capital over ...
  4. Long Term

    Holding an asset for an extended period of time. Depending on ...
  5. Passive Management

    A style of management associated with mutual and exchange-traded ...
  6. Passive Investing

    Passive investing is an investment strategy that limits buying ...
Hot Definitions
  1. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  2. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  3. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  4. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  5. Mezzanine Financing

    A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies. Mezzanine financing ...
  6. Long Run

    A period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all ...
Trading Center