In mid-afternoon trading, the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO) had slumped 0.4%, despite gains on US markets overnight.
But what the market is doing doesn't mean much for my portfolio. It's up more than 1% so far today, thanks to my strategy of buy and hold. 'Buy and Hold' gets a lot of flack, mostly from people who don't understand it.
It's a very simple strategy, but requires plenty of patience, and lots of inactivity.
Showing how much of an effect high frequency trading (HFT) is having and fund managers prone to becoming more 'active', holding periods of US stocks have dropped from seven years in 1955 to just over three months in 2012. The latest statistics for the ASX suggest a holding period of less than 12 months.
That's not buy and hold folks.
Here are two of my examples of buy and hold.
I bought shares in Cochlear Limited (ASX: COH) more than six years ago and have never sold a single one, despite all the issues the hearing implant maker has gone through in recent times with the recall of its top line processor and subsequent struggles to regain market position and grow revenues once again.
I've topped up along the way, even managing to buy some at around $53 last year. Over the six years, I've received thousands of dollars of dividends, and I intend to keep holding as the company's fortunes turn around. Cochlear shares are up 10% in mid-afternoon trading at $68.78.
Another example is telecommunications company M2 Group Ltd (ASX: MTU). I bought shares in M2 three years ago, and have never sold any, despite a number of large short-term falls along the way. And again, I've topped up as shares were sold off. Today, M2's shares are up 2.5% at $6.11. Will I be selling soon? Nope.
Now that's a simple, easy to understand and implement (almost lazy) strategy. No massive brokerage fees for me, and I didn't have to spend all day watching the markets or trading.
Is it time you gave it a go?
