Long Term Value Investor Is Not a Buy and Hold Strategy

The long term value investor seems to get a bad name attached to it in a lot of investment books and web sites these days. There are plenty of ways to make money in the stock market and buying and selling stocks as short term investments works for some investors. I even do it myself myself with a few stocks I own. I would venture to guess the average investor, who does not have time to research stocks every day, is better off in a long term strategy when it comes to buying stocks. This does not mean you are buying and holding until death do us part as some of these investment books and sites would have you believe. It simply means that nobody can pick tops and bottoms so you are better off staying in the game the whole time rather than jumping in and out every other week.

I know there are several factors to consider when deciding what kind of strategy you want to use when investing. For example, risk tolerance, years to retirement, quality of life after retirement and many others, but as a general rule long term value investing is the easiest way to a good return. It might be a little old school and not as sexy as trying to grab the next hot IPO, but you also will not be gambling on a long shot with your hard earned money.

Now I'm not saying you should not buy some growth stocks, in fact, I think it serves you well to have value mixed in with growth. You have to be on top of those growth stocks though because the shelf life is shorter and more volatile than a value stock. Sometimes the growth rate and PE have to come down so just be on your toes before the shoe drops.

A long term value investors still need to watch his or her portfolio carefully and try and stay diversified. You want to make sure you lighten your load in sectors and industries that are not working and redistribute to areas that are performing better. You still will want to stay diversified, but there is no need to be overweight in underperforming industries. A lot of web sites and books seem to suggest that when a value stock is purchased it is held for life and this simply is not true. You can move in and out of value stocks when you think they have run their course. All I know is Warren Buffett has made boat loads of money while investing in value stocks.

A value stock may not get you one of those rare 900% or higher returns on your money in a couple years. It also might not be the hot topic at the next cocktail party, but it does give you a better chance of beating the indexes if you do your homework. It's much easier to pick a good quality stock based off steady increasing earnings than to guess what a new high flying company will do with no previous history to gauge off.

Sometimes it might not be the most glamorous route to the finish line, but the chances of you finishing the race the way you want too are pretty good with a long term value stock strategy.

Source by Scott Kibby

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