Buy and Hold Strategy: Overview and Backtest

If you have ever looked at a stock chart, you would know that stock prices often swing about, which is why some people trade the swings for quick profits rather than wait out the inevitable downturns. However, most stocks rise exponentially over the long term, which is why investors like the buy-and-hold strategy. But what is the buy-and-hold strategy?

The buy-and-hold strategy is a long-term investing approach that involves buying stocks and not selling them for many years (even decades) — only selling a few portions when you need to raise money.

This strategy does not care about the short-term peaks and valleys in stocks but, rather, tries to make the most of the long-term potential of stocks — the fact that many stocks continue to rise over time. The strategy is in contrast to active trading, where traders try to time the market by buying when prices are low and selling when prices are high to lock in profits.