There are many different methods to invest in the stock market and each one has both positive and negative sides to argue. Every investment adviser out there will tell you something different, but one thing that most of them understand is the ‘Buy and Hold’ strategy of investing.
Buy and Hold is when you have a Buy Plan which says you are going to acquire value stocks that pay dividends and hold them for a long time.
There are several pieces to the statement I just made. Lets break it down.
- Acquire value stocks.
- These are stocks in solid, well known businesses in industries that have stood the test of time. These companies are probably not considered ‘hot’ or the ‘latest thing’. They are relatively low risk because they are already established in their market and their products are proven and reliable. They are also usually quite large companies that can weather changes in world markets.
- Stocks that Pay Dividends.
- Dividends are a companies way of paying you back for investing in their stock. The companies that I look at have a long track record of consistent dividend payments. They haven’t reduced or suspended their dividends and they might have recently increased payouts. These stocks might not have the highest dividend rates, but they are consistent.
- Hold them for a long time.
- There is a life cycle to every business. It is rare to find a company today that was alive 40 or 50 years ago. Wagon wheel manufacturers are no longer as needed as they once were. That said, a company can adapt and change their business as things change in the world. An example will be how well car companies adapt to an increasing demand for electric cars. This long term hold strategy requires you to keep an eye on changing times and consider if your company has the ability to weather changes in the demand for their products in the market.
It may not be the most exciting Buy Plan, but it has served me well over the years.