“Should I buy and hold or trade?” Well, why not do both? I have two portfolios: A “buy and hold” and a “buy to trade portfolio. Let me tell you about them. My Buy to Hold Portfolio
This “Buy and Hold” portfolio mainly consist of USD dividend-paying US stocks and ETFs like the broad market ETFs (VTI, VO). I buy and hold US assets because the US market for more than 100 years has experienced rises and falls, but the long-term trend is upwards. US Markets are Volatile
The US market can be measured by the movement in the Standard & Poor index (S&P 500); the S&P 500 tracks the performance of 500 leading publicly traded companies in the US selected based on their market capitalization. If I had bought the S&P in the year 1900, I would have seen slight price movements in twenty-four years from 1900 to 1924; then, my portfolio would have jumped nearly 40% in 1929 before crashing and becoming worthless. However, in 1931, my portfolio would slowly recover, stabilize for nine years up to 1948, then absolutely shoot up and up. I would also experience significant bear markets (stocks falling more than 20%) during black Tuesday on October 19th, 1987, and of course, the great recession in 2008. The Diagram 1 from Motley Fool shows the biggest stock market crashes in US history.
Diagram 1: Biggest US Stock Market Crashes
Long Term Trend of US Stock Market Is Up, So Hold
However, if you look at the long-term trend of returns of the US Market, its unmistakably up. The S&P 500 has posted an average annual return of about 8.2%. When you include reinvested dividends, it’s about 10.5%. This is not an annually return but an average over the life […]
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