Buy and Hold
Buy and hold is a long-term approach of buying assets and keeping them through market ups and downs, rather than trading frequently.
Buy and hold is the opposite of jumping in and out. You buy assets you are happy to own for years and keep them through rises and falls. It trades fewer decisions and lower costs for the need to sit through drops.
- Category
- Trading Strategies
- Reading time
- 3 min
- Also called
- Buy-and-hold investing, Long-term investing, Passive investing
- Updated
Buy and hold in plain words
Buy and hold means keeping investments for many years and riding out the ups and downs.1
Trading more often usually means paying more in commissions and fees, which works against active approaches.1
Even small fees add up to a big difference over long periods.2
How to follow a buy-and-hold approach
Set a long horizon
Decide how many years the money can stay invested.
Spread your holdings
Use Diversification so no single holding dominates.
Keep costs low
Keep costs low, because every fee leaves less money invested and compounding.2
Add regularly
Consider adding money on a fixed schedule rather than trying to time the market.1
Sit through drops
Avoid selling in a panic during falls.
Review yearly
Rebalance or adjust only on a set schedule.
Worked examples
Example 1 — Holding through a dip
PatienceA hypothetical investor holds a fund through a 20% fall and keeps adding.
| Fall | −20% |
| Value years later | Recovered and higher |
Staying invested through the drop meant never locking in the loss at the bottom.1
Example 2 — Selling and missing the rebound
Missed daysA hypothetical investor sells after a sharp drop and misses the rally.
| Sold at | Near the low |
| Missed rebound | Several strong days |
Several of the market's best days came during volatile stretches — easy to miss when trading in and out.1
Example 3 — Active vs holding costs
Cost gapTwo hypothetical investors start with the same fund; one trades it often.
| Trades per year | 1 vs 30 |
| Costs | Far higher for the trader |
Trading more actively brings higher transaction costs and perhaps fees, which cut into returns.1
Buy and hold vs active trading
| Aspect | Buy and hold | Active trading |
|---|---|---|
| Holding period | Years | Days to weeks |
| Costs | Low | Higher |
| Taxes | Fewer taxable sales | Frequent taxable sales |
| Main risk | Sitting through big falls | Costs and mistimed trades |
Where buy and hold is used
Retirement saving
Long horizons suit holding through cycles.
Index funds
Holding a broad fund for Diversification.
Regular investing
Pairing with Dollar-Cost Averaging.
Dividend investing
Holding shares for Dividend income.
Advantages and disadvantages
Advantages
- Low costs and few decisions.
- Fewer taxable events.
- Less time spent watching markets.
- Avoids missing the best days.
Disadvantages
- Large drawdowns must be endured.
- Poor holdings can be kept too long.
- Needs patience over many years.
- No protection from long bear markets.
Going deeper
Read as far as you need. Each level builds on the one before it.
What it is
Beginner
The strategy's core is patience: hold through market swings instead of reacting to them.1
Taxes
Intermediate
Each sale can realise a gain and trigger tax, so holding longer can defer tax as well as costs.1 Tax rules differ by country.
Costs
Advanced
Fees look tiny in any single year but compound into a large drag over decades.2
Common mistakes
Panic selling
Selling at the low locks in the Drawdown.
No diversification
One holding can sink the plan.
Ignoring fees
High fund fees compound too.
Never reviewing
Holding still needs a yearly check.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Buy and hold keeps assets through ups and downs.
- It keeps costs and decisions low.
- Selling in a panic can miss rebounds.
- Tax rules differ by country.
- Diversify and review on a schedule.
Frequently asked questions
Is buy and hold the same as never selling?
Does buy and hold work for every asset?
Can I combine it with trading?
Further learning
- Diversification
Spreading risk across holdings.
- Dollar-Cost Averaging
Investing at regular intervals.
- Drawdown
What holding through a fall feels like.
- Loss Aversion
Why panic selling is tempting.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- FINRA. What Is Market Timing? (opens in a new tab) Checked .
- SEC Office of Investor Education and Assistance (Investor.gov). How Fees and Expenses Affect Your Investment Portfolio – Investor Bulletin (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.