What does "buy and hold" mean?

By Investopedia Staff AAA
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.

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