Passive or diversified buy & hold, investing
People participate in the stock market with different investing styles. You have probably heard of adrenaline-packed investors who trade all the time and enjoy taking considerable risks on a few companies, to find out if their exhaustive research brings them important profits. This website focuses in an investment style that is the opposite of that. We aim at buying securities and keeping them for the long term, to compose a diversified portfolio tailored at one's objective and risk-absorption capacity.
This style is frequently called diversified buy & hold or passive investing. Compared to frequent trading, it has less fees and more tax efficiency. The portfolio is not tied to a few companies, so there is also an advantage in regards to risk. What about returns? Contrary to what you might think, many experts claim that studying companies to pick stocks has no point. Put in other words, that stock pickers cannot constantly earn more than the market average, which is a situation that investors call beating the market. The reason for this stems from the fact that there are lots of resourceful experts competing in the market. Hence, if an opportunity to buy a cheap stock arises, only a very small portion is able to seize it. When they buy the stock, their demand moves the prize up to a normal level, ending the opportunity.There is enough evidence to claim that this theory is true at least to a high degree.
Benefits of Buying & Holding Diversified Assets
The consequence is that focused trading offers no more than small benefits, if any, and only to those who delve deep into the companies they are acquiring (and the lucky). Most of the money invested in the financial markets is allocated through diversified buy & hold strategies, because they don't have less growth potential, at least not significant lower ones, while they carry less expenses, taxes and risk. Moreover, these investors save a lot of time and learning, because they don't need to research individual companies, keep up with the news and trade all the time.
If you enjoy frequent focused trading, then you will make a limited use of this website, but if you want to invest in a calmer, safer way, then you are visiting a resource created just for you. Actually, these two investment styles are extremes. Many investing strategies combine them. For example, if you enjoy the thrills of focused trading, you may invest a minor portion of your capital using that style, while most of it is invested on diversified assets held for long. That provides the reliability and low costs of a passive investment strategy, while keeping a sane amount of the thrills of focused trading.
If you are introducing yourself to the art and science of portfolio construction to obtain better profits from your savings, but not to delve deep into trading, then it makes a lot of sense to concentrate on learning how to trade with diversified buy & hold strategies and forget about focused trading. That way, with a reasonable amount of work you will become competent enough to make informed decisions about your investments, without the need to spend much time and effort on each of these decisions. You will save yourself from going through a lot of theory and news that focused traders need.