Why You Should Invest in Stocks

You Can Trade or Buy and Hold Stocks

Stocks offer traders and investors opportunities for success. This is not unique among securities, but it does make equities a versatile investment.

Long-term investors (buy and hold) have found opportunities for success in picking good companies and riding with them until something changes the investor’s opinion of the company or its stocks.

Buy and hold investors are often ridiculed for riding a stock up, and then riding it right back down.

This is certainly a risk, but smart buy and hold investors understand that a good deal may not be good forever.

There is a time to hold and a time to take profits and move on to another opportunity.

The financial meltdown of 2007-09 fed the fire of criticism for the buy and hold strategy. Critics pointed to the many investors that saw their net worth plummet.

No one is immune from major market pullbacks, but with proper asset allocation and attention to what is happening in the economy, buy and hold investors have just as good of chance at success as traders.

Traders move in and out of positions based on what the market is doing.

One extreme is the day trader who closes out all positions at the end of each day. Other traders stretch their holding period as long as they are making profits, whether that is hours, days or weeks.

Traders also cut their losses quickly and move on to the next deal.

Are traders more successful than investors? That depends on whether you are comparing smart traders and dumb investors or the other way around.

Traders, also known as active investors, can be very successful if they are clever and work hard. You can say the same thing for buy and hold investors.

The bottom line is success with either strategy takes focus and hard work.

Which you choose (and some do both), is a matter of personal preference. Stocks give you the option to choose.