• Retirement IncomeInsight
• Asset Allocation
• Dollar Cost Averaging
• RetireSense
• Starting to Invest Now
• Compounding
• Diversify Your Investments
• Investing in Foreign Markets
• Automatic Rebalancing
• Buy and Hold vs Market Timing
• Choosing Funds
• Protecting Assets

Investment Strategies: Buy and Hold vs. Market Timing

As an investor, you have many options of how to manage your money. Two common investment strategies are called “market timing” and “buy and hold.”

What’s the difference?

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.

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 make a mistake, and don’t move your money at the right time, you can miss out on a market upswing that you would have otherwise experienced.

How do I choose a strategy?

Your investment strategy in this case depends on how much time you have to devote to watching your investments. To have a chance at being successful in market timing you really have to keep an eye on the market every day, or pay someone to do it for you.

A buy and hold strategy is much simpler, 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. And please keep in mind that investing involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved.