Plain Money ideas Plainmoney investing

“It’s not vulnerable to wild rides”

Reasons just keep mounting up to follow a simple stock market strategy of buying and holding index funds. There was a one-day “wild ride” on the major stock exchanges May 6, 2010. Stocks lost hundreds of points in minutes and then regained most of the loss in minutes. None of this caused distress for long-term buy-and-holders. Day-to-day fluctuations don’t matter much when you’re in the market for the long term. In fact, by making some investors more afraid of stock risk, these short-term swings can increase the overall return to holding stocks. The long-term return to holding stocks is so high that it’s referred to by researchers as the “equity premium puzzle.” The implication for the average investor? Buy and hold!