Improving the “Buy and Hold” strategy

Much of what you read and hear from “experts” is that you should “Buy and Hold” stocks and have a fixed investment schedule. They recommend that you find a quality company (or mutual fund), buy fixed amounts of stock out of your paycheck every month, and hold that stock for quite some time (maybe even decades). As I pointed out in the example from my book, The Confident Investor, it is possible to improve on this expert advice.

The “Buy and Hold” and “invest regularly” philosophy seems easy. It also shows commitment to your favorite stocks, but it’s not the philosophy that the “experts” use when they buy a stock!

EXAMPLE: Warren Buffet is considered to be one of the smartest buyers of companies ever. In a two-week span at the end of September 2008, Mr. Buffet bought stock in General Electric (NYSE:GE) and Goldman Sachs (NYSE:GS). He did not buy just a little bit; he invested billions of dollars in each company in return for a large percentage of those companies. If GE and GS were such great investments, why did not he just put a regular installment system in place to buy the stock? Of course, they made him a special deal for the investment, but that only proves that when the price is right, you need to act.

EXAMPLE: Microsoft Corporation (NASDAQ:MSFT) acquired all of the stock of Skype in 2011. This acquisition did not happen slowly by Microsoft investing in the Skype stock every month until they owned it all. Rather, Microsoft went to Skype investors and offered to pay them more than the current market price of the company. They did this because they saw value in total ownership of the company immediately. Microsoft executives evidently felt that Microsoft would be more profitable by buying all of Skype at one time.

The pages of the Wall Street Journal and Investors Business Daily have stories almost every day of individuals and corporations buying substantial portions of a company. These are some of the brightest investors on the planet. They show by their actions that the prudent way to purchase stock is to find a company that is priced right and invest their cash in that company. So why should you listen to experts say to “buy and hold” on a regular basis, when many experienced investors make substantial investments?

This site and my book are dedicated to trying to give you a better methodology. If you really want to understand how to significantly increase your wealth, you should purchase my book, The Confident Investor. You can purchase my book wherever books are sold such as AmazonBarnes and Noble, and Books A Million. It is available in ebook formats for NookKindle, and iPad.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.