Kavan Choksi Professional Investor Discusses the Benefits of Holding Stocks for the Long Term



A long term investment strategy ideally involves holding investments for more than a year. This strategy can involve holding a variety of assets, ranging from stocks and mutual funds to bonds and exchange-traded funds (ETFs). Kavan Choksi Professional Investor mentions, to successfully execute a long term investment strategy, one has to stay patient and maintain a disciplined approach.

Kavan Choksi Professional Investor marks the benefits of holding stocks for the long term

The asset one chooses for their long term investment strategy can depend on multiple factors, including investment goals, amount of capital, risk profile and tolerance, and so on. Broadly speaking, stocks have generally outperformed almost all other asset classes over the long term. The S&P 500, for instance, returned an average of 11.82% per year between 1928 and 2021. This compares favourably to the 3.33% return of three-month Treasury bills (T-bills) as well as the 5.11% return of 10-year Treasury notes. The

Following a long term investment strategy for the stock market can be a good way to ride out its highs and lows. It is not uncommon for stocks to drop 10% to 20% or more in value over a shorter span of time. It would be a good idea for investors to try out riding some of these highs and lows over a span of multiple years or even decades in order to generate a better return over time. Short term market fluctuations and volatility can be mitigated through a long term perspective. Over an extended period, the impact of market downturns tends to be balanced by periods of growth, providing a smoother overall return trajectory. Long term investors have the luxury of time to recover from market downturns. Historical market data shows that, over extended periods, the stock market is likely to rebound from downturns, allowing patient investors to recoup losses and benefit from subsequent growth cycles.

Not all investors can competently time the market. Moreover, being emotional is among the prime inherent flaws of investor behavior. A large number of people claim to be long term investors till the stock market starts to fall. During such a time, many of these individuals withdraw their money to avoid additional losses.

A large number of investors even fail to stay invested in stocks when a rebound occurs. Rather, they often jump back in only when most of the gains have already been achieved. Such a buy high, sell low behavior can cripple investor returns. Investors too get too caught up in market fluctuations often end up hampering their chances of success by trying frequently to time the market . Following a simple long-term buy-and-hold strategy can yield these investors far better results.

As per Kavan Choksi Professional Investor, several established companies pay dividends to shareholders. Long term investors can benefit from a steady stream of income through dividend payments, providing an additional source of returns and helping to offset market volatility. Following a long term investment approach can also incur lower expenses for an investor. Keeping stocks in the portfolio for a longer period of time is much more budget friendly than regularly purchasing and selling shares, as the longer one holds their investments, the fewer fees they have to pay.