Sometimes old advice is the best advice. And one bit of ancient, but still winning, investment advice is to buy quality stocks and never sell.
Merely uttering that bit of wisdom can turn anyone into a flinty, 19th century New Englander. But those flinty, old Easterners were onto something. It turns out that buy and hold, hold, hold produces the highest returns. And that’s not just folklore.
A Super-Long Hold
Daniel Crosby, a behavioral finance expert who holds a PhD in psychology from Brigham Young University and also heads his own advisory firm, makes this point in his new book, “The Laws of Wealth: Psychology and the Secret to Investing Success” (Harriman House, 2016). He points to figures from Morningstar based on market data from 1926 through 1997, which show that if you held stocks for a really long time – any 25-year period within that time frame – the worst you would have done is earn around 6% a year on your money. And the best, if you were lucky enough to have invested in what turned out to be the most rewarding 25-year stretch, was almost 15% a year.