Buffett is used as a paradigm by the media and financial counsellors of why you should Buy and Hold. But the depiction isn’t really accurate. When you buy and hold a stock, you buy it and hold it no matter what.
It does not subject to if there is good news or bad news, a Democrat or Republican president, a recession or an economic boom. You hold the stock through good times and bad, you just do it!
Buffett, on the other hand, buys for certain reasons, and when those reasons are no longer present, he sells.
Known as a value investor – one who buys stocks that have a low price-to-earnings ratio – Buffett looks for good prices, sound management, and a competitive advantage.
For example, in a 1996 letter to shareholders, he stated Sears, GM, and IBM as companies that were great, but could not continue competitive in their marketplace, and so they would have been companies to dump out of a portfolio.
Buying a stock and holding it forever is not what the Mystic of Omaha does.
Of the initial 20 companies in which Buffett financed, the only one he still holds is Berkshire Hathaway, and that is probably only for its name. Each of the other 19 he no longer possesses.
Yet, we have writers, financial advisors, business news heads, and self-proclaimed investment educators who tell you to do just that. But if the world’s richest “investor” does not do that, why should you?