Buy-And-Sell vs. Buy-And-Hold Strategies
Buy-and-sell investors frequently trade on their own. Buy-and-hold investors buy with the help of professionals and hold their stocks for a long time.
Buy-and-sell investors can be divided into four categories, in my opinion:
Day traders: They buy and sell the same day and rely on technical analysis and other tools to predict the movement of a particular stock during the day.
Swing (or market timing) traders: They buy when they think the market or a particular stock is low and sell when they think it is high
Momentum traders: They buy stocks that are gaining momentum and are rising.
Random traders: They buy and sell based on a friend's advice, news, a hunch, or emotions. However, some are more sophisticated and rely on professional sources advising them on what to buy and sell.
Buy-and-hold investors invest in portfolios constructed and monitored by professionals to perform in the long run, and they hold their investment as long as they don't need it. The portfolio manager buys and sells some within the portfolio to improve performance and rebalance the portfolio.
Buy-and-sell investors need to commit a lot of time to gain skills and knowledge and additional time to buying and monitoring. Buy-and-hold investors leave their investment with people who do that full-time on their behalf.
Buy-and-sell investors need to respond quickly to market conditions or the swing of a particular stock. Therefore, it is really hard to do well while you work full-time. In addition, the ups and downs can be emotionally stressful to the investor, especially with their limited resources and support. This may lead to emotional buy-and-sell decisions.
Buy-and-sell investors have many more transactions, which generate a lot of taxes. Those taxes are short-term gains and a lot higher than long-term gains (long-term: holding the investment for at least one year). Losses may not be able to be deducted due to short sales or the limit of claiming only $3000 of losses per year on individual tax returns.
Buy-and-sell investors often have to pay transaction fees. They usually use delayed market data (by about 20 minutes), and they must pay significant subscriptions to gain access to real market data. They might have access to professional advice but must pay for it. However, access to timely, reliable, accurate, nonbiased, and well-researched information is expensive. Lastly, the tools needed to evaluate the portfolio cost money and often do not provide better advice on constructing the portfolio.
Buy-and-sell investors lack the tools and time to perform well, and their performance is variable. Therefore, I recommend that investors dedicate their investment management to professionals and hold their investments for a long time. This will save them a lot of time and stress, and their investments are much more likely to perform better.