Please do not just buy and hold any stock anytime. It is important that one learns how to buy and hold.
Buy and hold can reserve nasty surprises when it all starts well and suddenly the economy or company gets into a mess. For those who are holding on for too long, note that due to the activities of trading algorithms, one can be forced to take losses or hold on to a stock that the algorithms have marked undesirable. The markets can quickly change when one is thinking to grab a tidy profit. With that, one can be stuck to a degrading financial instrument for an unnecessary length of time.Buy and hold can also become tricky to those who do not know how to cut losses.Take it from me, every investor at one point will have to cut losses instead of keeping useless stocks. Buy and hold also requires that one knows how to boost a losing position instead of being caught up in a value trap. For example, one buys a stock X at $20. After few weeks, the stock declines to $8.
One can wait until one day, may be it rises above $20 or one can buy more if one knows how and when to buy the dips. The value trap occurs when one is doubling down on a useless financial instrument that keep going down (bottomless pit).
The opportunity to buy the markets' dips in a timely fashion can help one boost and recover a losing position before it is too late. It takes a bit of time to get used to that exercise. Do not worry, but keep improving it.
Buy and hold is also tricky when one buy the financial instrument at the top of the bullish trend. It is a market timing mistake.In that instance one must not start buying the dips. It is crazy, but it is happening all the times because the traditional investors deny themselves the right to learn the Elliott wave principle. I feel sorry for them.
Usually, those who buy at the top of a bullish trend just as the correction is about to start tend to double down during the correction instead of waiting for it to end. A better approach would be to wait until a new trend starts before one buys again. That mistake can cause one to carry a losing position for years.
In the worst case scenario, some investors do sell their stocks at loss just as a new trend is about to start because they can not wait anymore. So people are buying high at the top of the trend, and selling when it is finally oversold.
One can avoid that investment error by checking my seven investment tips. Really, one must buy low and sell high or buy the dips on the edge as the trend is not yet finished.The challenge is huge even more when one does not know how to manage gains. In that case, one can see a profitable position becomes a loser.
For example, one bought a stock X at $12 and a year later is at $24. That is a 100% gain. Imagine after one month the stock started to decline. Firstly, it dropped to $15, then $12 and $4.
Now, a profitable position is turning red. Sometimes, one can get away with that mistake, but in many instances, one will not if a correction just starts at the end of a bullish trend.
In many occurrences, one can end up holding on to that stock for more than eight years.
