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Buy and hold

Buy and hold: what it is and what research shows

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What research shows about buying and holding, and about the cost of trading too much.

Buy and hold means buying investments to keep them for years, instead of trying to time when to get in and out of the market.

That doesn't mean never touching your portfolio. You keep investing, and the weights can be brought back to your targets from time to time.

This article shows what research has found about buying and holding, and about the opposite. It doesn't say what to buy: the targets and the assets are your choices.

People who trade more tend to earn less

One of the most cited studies on the subject followed 66,465 households with accounts at a US discount broker from 1991 to 1996. The households that traded the most earned 11.4% a year, while the market returned 17.9%. The average household turned over 75% of its portfolio each year. The authors' conclusion became the paper's title: trading is hazardous to your wealth (Barber and Odean, 2000).

In a follow-up study of more than 35,000 households, men traded 45% more than women. Trading cut men's returns by 2.65 percentage points a year and women's by 1.72, and the authors link the difference to overconfidence (Barber and Odean, 2001).

In Taiwan, using every trade on the stock exchange from 1995 to 1999, individual investors lost 3.8 percentage points of return a year by trading. Each year, their combined losses equaled 2.2% of the country's GDP (Barber and others, 2009).

In Brazil, a study by the FGV business school with the country's securities regulator, the CVM, followed people who started day trading, which means buying and selling on the same day (CVM, 2020):

  • In mini index futures, 92.1% of the 19,696 people who started between 2013 and 2015 quit before 300 trading sessions. Of the 1,558 who kept going for more than a year, 91% lost money.
  • In stocks, of the 98,378 people who started between 2013 and 2016, only 554 went past 300 sessions. Their gross result averaged a loss of 49 reais a day.

Getting the timing wrong is expensive

When money goes in and out also affects what fund investors earn. Morningstar compares the returns of US funds with what their investors actually earned, given when their money came in and went out. Over the 10 years to December 2025, the funds returned 9.9% a year, and investors' money returned 8.7%. The gap, 1.2 points a year, is about 12% of the return. Morningstar says it can come from behavior, such as chasing returns, but also from the setting each person invests in (Ptak, 2026).

Catching the best days is close to impossible. In a study of 15 stock markets and more than 160,000 trading days, missing the 10 best days left portfolios, on average, 50.8% smaller than staying invested. Those 10 days were less than 0.1% of the days studied (Estrada, 2008).

Buy and hold what

Holding a single stock for a long time is a different story. In the US since 1926, most stocks returned less over their lifetime than one-month Treasury bills, and the best-performing 4% account for the stock market's entire net gain. The author says this helps explain why poorly diversified strategies usually fall behind the market average (Bessembinder, 2018).

Worldwide, from 1990 to 2020, 57.4% of stocks outside the US returned less than those bills, and 2.4% of companies accounted for all of the $75.7 trillion in net wealth created in stock markets (Bessembinder and others, 2023).

Even a whole country can take a long time. Japan's Nikkei index hit a record on December 29, 1989, and only passed that level on February 22, 2024, 34 years later (Nippon.com, 2024). The index doesn't include dividends, but the example shows the risk of relying on a single country, the topic of How much international stock should you own?

What it changes in your life

Watching your portfolio all the time changes your decisions. In experiments, people who saw their investment results more often took less risk and earned less money (Thaler and others, 1997; Gneezy and Potters, 1997). Researchers call this myopic loss aversion: losses hurt more than gains please, and someone who evaluates a portfolio very often sees more losses along the way (Benartzi and Thaler, 1995).

Market drops also weigh on health:

  • In California, from 1983 to 2011, daily stock market drops came with more hospital admissions, especially for anxiety, panic and depression (Engelberg and Parsons, 2016).
  • In the US, large stock market drops were linked to worse mental health, more smoking, more binge drinking and more fatal car accidents involving alcohol (Cotti and others, 2015).
  • Among older Americans, losing 10% of wealth slightly worsened physical health, mental health and survival, by 2% to 3% of a standard deviation (Schwandt, 2018).

These studies don't compare people who buy and hold with people who trade a lot. They show that market swings affect people. And pretending the portfolio doesn't exist doesn't solve it either: investors check their accounts more when markets rise and avoid looking when they fall, which researchers called the ostrich effect (Karlsson and others, 2009).

To narrow the gap between fund returns and investor returns, Morningstar suggests trading less on impulse, buying on a fixed schedule, such as investing every month, holding fewer and more widely diversified funds and, in certain cases, automating tasks like rebalancing (Ptak, 2026).

Buy and hold, investing every month

Buy and hold fits with investing every month. The investor guide from the SEC, the US securities regulator, says rebalancing tends to work best when done relatively infrequently. For people who keep investing, it suggests sending more money to the parts below their targets until the portfolio is back in balance (SEC). That's the math the article How to rebalance your portfolio without selling shows with numbers.

Sources

When a journal article is paywalled, the link goes to a free version from the authors when there is one, or to the page with the abstract.

Aportly does this math in whole shares, against the targets you set.

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Keep reading

How to rebalance your portfolio without selling

How much international stock should you own?