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The extreme volatility in global stock markets over the past 3 years has raised questions about the wisdom of a buy & hold strategy, epitomised by one of the world's best investors, Warren Buffet.
Despite market uncertainties, we think that there is still a role for strategic or long term investments in one's portfolio. Time increases the probability of achieving better returns, but it is not a guarantee. Even if you start investing with a long term view of 5 years, it does not mean that you have to stay invested for the full period.
This is where many investors get it wrong with the buy & hold strategy. They set off investing for the long term, with a certain return in mind, but they do not take profit once their target is achieved as they get overcome by greed and seek more gains.
In other words, buy & hold until your investment meets your targeted return. Once your target is met, be disciplined about selling and locking in your profit. If you do not, it could wither away if markets experience a downturn subsequently.
Have a question about the financial markets? Ask Vasu today.
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