As an investor, you have many options for managing your money. Two common investment strategies are called “buy and hold” and “market timing.”
The buy and hold strategy
A buy and hold strategy is just what it sounds like. You buy shares and hold onto them no matter whether the stock market is going up or down. The market has historically gone up over long periods of time, so depending upon when investments were bought and sold, people who used this approach should have earned a profit. This strategy may also be structured to rebalance investments to maintain a consistent asset allocation.
A buy and hold strategy is simple, since it doesn’t require constant monitoring. Just invest your money and take a look at your account balance now and then to make sure you are meeting your goals.
The market timing strategy
Market timing is more complicated. You have to anticipate the best times to get in and out of the market, and buy and sell your shares accordingly. If you’re lucky, you can make a higher profit this way, but if you don’t move your money at the right time, you can miss out on a market upswing that you would have otherwise experienced.
With market timing, you really have to keep an eye on the market every day, or pay someone to do it for you.
With either strategy, keep in mind that investing involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved.