You might hear people boasting at a BBQ about their big win on 'Speculative Stock X' or how they hit the jackpot on Stock Y after having only held it for a week, but what you don't hear about is their huge losses, tax implications or enormous brokerage fees incurred for their frequent trades!
Frequent buying and selling may seem like an exciting and sexy way to invest, but it is by no means the greatest way to build your wealth over the long term.
Although there have been many headlines and reports released suggesting that the "Buy and Hold" method of investing is dead, it still to this day remains the wisest wealth-creating strategy. Instead of trying to time the market, history has shown that it is far more profitable to spend time in the market. That is, buying quality stocks when they are trading at reasonable prices and then letting their value compound over time.
It is even better when the compounding phenomenon can work its magic on any dividends paid out by the companies over the years! Look at Woolworths Limited (ASX: WOW), for instance. The stock itself has risen 212% in the last 10 years, but when dividends are included, that figure is actually closer to 300%!
Imagine carrying a portfolio of stocks like that into retirement… Needless to say, it would likely be a pretty comfortable retreat from the working life.
While I don't necessarily see Woolworths as an excellent buy at today's price (there is no questioning the strength of the company but I think investors can do better in regards to value for their investing dollars), there are plenty of other companies I think investors should have a look at.
For instance, M2 Group Ltd (ASX: MTU) or Telstra Corporation Ltd (ASX: TLS) would both be excellent companies to buy and hold for the coming years — maybe even decades — while Coca-Cola Amatil Ltd (ASX: CCL) or Veda Group Ltd (ASX: VED) could also be considered.
