The Myth of Buy & Hold: Financial Advisor Don Dirren Explains What Investors Need To Know
PHOENIX, AZ / ACCESSWIRE / October 6, 2020 / Investing can be tough, and many investors find it easier to buy and hold than to pay attention to the fluctuations of the market. Financial advisor Don Dirren explains that while some people get lucky with the buy and hold strategy, it's not necessarily a good fit for everyone.
The idea behind the buy and hold strategy, according to Don Dirren, is that the market naturally fluctuates over time. Allowing investments to hold (rather than selling when the market dips) may produce larger long-term growth. There are a few reasons why Don Dirren says that isn't the best strategy for many investors.
First, Don Dirren says that this strategy inherently implies that every year is a good year to purchase stocks. Due to market fluctuations, this isn't always the case. While there's always the potential for a reward when making an investment, paying attention to the market can be important. Don Dirren recommends working with a financial advisor to develop a plan on when and how you'll invest, rather than assuming that any time is a good time.
Buy and hold strategy implies that the price of stocks and other investments doesn't matter due to the potential for growth over time. Don Dirren recommends thinking carefully about whether this is a financial principle with which you feel comfortable. It's likely that price matters to you with other purchases you make - it should matter to you when purchasing stocks and other investments as well. Buy and hold strategy assumes that no matter what you pay for your investments, in the beginning, it will all even out in the end - but this is a faulty assumption.
Don Dirren also recommends learning more about risk management before you decide that a buy and hold strategy is the right financial move for you. Being an active participant in your investments is a key part of risk management, says Don Dirren. Rather than passively allowing the market to control your money, risk management allows you to play an integral role in what happens to your hard-earned money.
According to Don Dirren, no reason to be passive when it comes to managing your investments. You're active in maintaining and improving other aspects of your life - and you should do the same for your finances. If you're currently working with a financial advisor who only recommends that you abide by a buy and hold policy, Don Dirren recommends doing your research to decide whether this strategy is actually a good fit for your portfolio.
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SOURCE: Donald Dirren