This Is the No. 1 Reason Graham Stephan Says to Hold Your Investments

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It’s advice worth taking. 

There are different reasons why people invest in stocks. Your objective in buying stocks in your brokerage account may be to put your kids through college. Or maybe you have stocks sitting in your IRA that you hope will help pay your retirement expenses once you stop working.

Investing in stocks could end up being a lucrative move for you. Though stocks tend to be volatile, investors who buy them and hold them for years are often rewarded with strong returns.

On the other hand, trying to get rich quickly in the stock market is a move that’s likely to backfire on you. And selling stocks the instant they start to lose value isn’t a great bet, either. And if you’re not convinced, just listen to what this expert has to say.

Why ‘buy and hold’ is really your best best

You might sell your stocks quickly after buying them because you want to enjoy a quick profit. Or, you might dump some stocks at a loss shortly after acquiring them because you’re concerned about losing even more money.

Neither approach is ideal. A better one is “buy and hold,” which is when you load your portfolio with a diverse mix of quality stocks, and then hold them for many years, so they’re able to gain value over time.

Remember, stocks don’t always gain value from one year to the next. Sometimes, the broad market can have a down year. In other situations, the specific stocks you own might underperform due to factors like poor earnings or prospects.

These things are hard to predict. That’s why you should specifically plan for some down years in the course of your investing career. But if you also adopt a “buy and hold” approach to owning stocks, you’re more likely to avoid needless losses and make money in the long run.

Investing guru Graham Stephan agrees. In a recent tweet, Stephan said, “If you lose 95% of your money, you have to make a 1900% profit just to get back to where you started. Staying in the game is the most important thing. Make it priority No. 1.”

What Stephan is trying to say is that being quick to sell a stock that’s doing poorly could really backfire on you. So instead of doing that, plan to exercise patience.

And at the same time, only invest money in stocks that you don’t expect to need or use for at least seven to 10 years or so. That gives you a decent window of time to ride out years of poor stock market performance and come out ahead financially.

It’s all about thinking long term

Stocks aren’t the only asset with the potential to gain value over time. Real estate, for example, works similarly. If you buy a home today with the goal of selling it in three years, you may not walk away with a profit. But if you’re willing to hold onto that property for 10 or 15 years, your chances of making money are higher.

The same holds true in the world of buying stocks. So the next time you’re tempted to dump one in a panic or sell one for a near-term profit, remember to think long term and keep that stock in your portfolio.

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