Investing in the stock market can double your money every ten years, and Buy & Hold is one of your options when choosing a strategy to start investing.
I started investing with Buy and hold, also known as investing in dividends and buying and holding.
There is one thing about dividends I do not like, which I did not know at first. But we’ll get to that later.
What are Buy and Hold?
Buy and Hold (B&H) is a long-term investment strategy based on buying shares of stable companies that distribute dividends and hold them indefinitely. Of course, on occasion, claims will be sold, such as, for example, in the irreparable deterioration of the company. These types of companies are known as Blue Chips.
It is not enough to make a purchase; you must invest continuously and constantly (that is why it is a long-term strategy).
It is essential to try to buy at the best possible prices, but choosing the right companies is necessary (if we never want to sell, you must choose very well). The objective of the Buy and Hold is to obtain dividend income that allows you to have an extra salary, just as if you bought a property and rented it.
Earlier, I told you that I have three strategies, which share these characteristics, so they are not unique to Buy and Hold.
Invest in the Long Term
You are not looking for a punch. The intention is not to buy and sell continuously but to buy to hold indefinitely.
There are three reasons why a person becomes a long-term investor.
- It requires less time, freeing you of continuously watching the markets
- It is practical and likely to result in meaningful wealth creation
- It reduces fees and taxes and keeps more money in your account.
Invest in Equity and the Stock Market
Therefore, what characterizes Buy and Hold is that you buy shares of large and stable companies that distribute dividends.
Desired characteristics in companies – blue chips
Companies with continued benefits
Suppose we are going to buy a company to maintain it indefinitely. In that case, we must ensure that it always benefits in times of prosperity or crisis. We do not want a company that has a bad year every three years or things like that. We are looking for companies with stable and growing benefits.
Large companies
Small companies are easily manipulated and may have problems due to their size, so acquiring large companies with high market capitalization is essential.
Companies that distribute dividends continuously
The key to Buy and Hold is to look for a periodic income, so we want companies to share a portion of their profits as dividends.
We are looking for companies with a good dividend distribution history, not cyclical companies that pay dividends only in the good years.
Companies that have been in the stock market for years
We are looking for companies with a history of benefits and dividends, so companies must take 5-10 years or more in the stock market to have that history.
Many new companies go public continuously, getting a lot of publicity, so many people invest in them. Not having a history behind it makes it exceedingly difficult to predict whether the bet will go well.
All in All
Long-term investing requires perseverance, conviction, and the capacity to do nothing when others are active with their portfolios. Investment in the stock market gives you leverage for years as its profits change with the stock market variation. Whenever you build a new house, strive to make it a double or triple-story, as it will be the best investment to provide you with a long-term profit.
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