Teak

Buy and Hold Is Alive and Well

Buy and Hold makes sense if you buy solid dividend-paying companies that will be around and paying dividends in the future. When their prices go down (and stay down), the dollar-cost averaging of a growing dividend payment, reinvested, works in your favor.

If you plan on trying to live off the dividend stream, then there is no point in worrying about the price going up; in fact, you don't want to the price to race up. My hope (plan) is that my children will inherit my shares after I use the dividend stream for retirement income. Isn't this what investing in companies is supposed to be about?

If I started my own company, I wouldn't sell it, buy it back, sell it, buy it back, etc. ad nauseum. I would own the business long-term and trust that it would give me an income stream long-term. It is this craziness surrounding day-trading, week-trading, month-trading that makes for the silly up-and-down price movements. The price of xxx goes up Monday 1%; it falls 1% on Tuesday; it goes up on Wednesday, falls on Thursday; retraces on Friday. Back to square one. Did the business really change that much in one week??