{"id":8426,"date":"2014-09-11T09:36:12","date_gmt":"2014-09-11T16:36:12","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=8426"},"modified":"2016-12-21T07:27:54","modified_gmt":"2016-12-21T15:27:54","slug":"like-buffett-pick-investments-last-forever","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/like-buffett-pick-investments-last-forever\/","title":{"rendered":"Like Buffett, Pick Investments That Last Forever"},"content":{"rendered":"<p><a title=\"Invest Like Warren Buffett: Buy and Hold\" href=\"https:\/\/www.marketriders.com\/investing\/invest-like-warren-buffett-buy-and-hold\/?utm_source=marketriders&amp;utm_term=2014-09-11-buffett-invest-stocks-forever\/\">Warren Buffett<\/a> is famous for saying that his favorite holding period for stocks is &#8220;forever.&#8221;<\/p>\n<p>Like many of his quips, it&#8217;s good for a laugh but also contains a kernel of investing truth: The real gains from stock investing are not made from trading but from owning.<\/p>\n<p>If you own the &#8220;right&#8221; stocks, then the right holding period is, in fact, forever. Buffett does hold stocks for a long time, often for decades. Over the years, they <a title=\"How Dividend Payments Build Long-Term Wealth\" href=\"https:\/\/www.marketriders.com\/investing\/dividend-payments-build-long-term-wealth\/?utm_source=marketriders&amp;utm_term=2014-09-11-buffett-invest-stocks-forever\/\">generate steady dividends<\/a> and many\u00a0split and split again.<\/p>\n<p><a href=\"https:\/\/www.flickr.com\/photos\/jonassmith\/49439862\/\"><img loading=\"lazy\" class=\"alignnone  wp-image-8470\" src=\"https:\/\/www.marketriders.com\/investing\/wp-content\/uploads\/2014\/09\/wall-st.jpg\" alt=\"buffett\" width=\"459\" height=\"297\" srcset=\"https:\/\/www.marketriders.com\/investing\/wp-content\/uploads\/2014\/09\/wall-st.jpg 640w, https:\/\/www.marketriders.com\/investing\/wp-content\/uploads\/2014\/09\/wall-st-300x194.jpg 300w\" sizes=\"(max-width: 459px) 100vw, 459px\" \/><\/a><\/p>\n<p>Of course, Buffett also sells from time to time. How does he\u00a0square this idea with the &#8220;forever&#8221; philosophy, and how can you put the strength of his buy-and-hold conviction to work for your portfolio?<\/p>\n<p>Here&#8217;s how the Buffett &#8220;forever&#8221; idea breaks down in practice:<\/p>\n<ul>\n<li>If you are going to buy a stock, first remember that you are buying a business. As an owner, you should expect to enjoy the proceeds but also the increase in the\u00a0value\u00a0of the business itself.<\/li>\n<li>The basic idea of owning stocks at all is to try to earn a <a title=\"How to Invest in U.S. Stocks\" href=\"https:\/\/www.marketriders.com\/investing\/how-to-invest-in-us-stocks\/?utm_source=marketriders&amp;utm_term=2014-09-11-buffett-invest-stocks-forever\/\">long-term rate of return<\/a> that is greater than the alternatives: bonds, cash or real estate.<\/li>\n<li>However, you also want to make sure to allocate your money to the highest return at the level of volatility you can accept. If a stock begins to fall short of your expectations, you are right to sell it and allocate that money to a different\u00a0stock with\u00a0comparable risks.<\/li>\n<\/ul>\n<p>Now, if you are Warren Buffett, you do your homework. You delve deeply into the books of a given investment opportunity. You meet the managers, tour the plants and send your people out to survey the market and the competition.<\/p>\n<p>And, since you have a lot of resources, you negotiate a great price, an entry point low enough to <a title=\"3 Steps to Maximize Investment Gains With Less Risk\" href=\"https:\/\/www.marketriders.com\/investing\/3-steps-maximize-investment-gains-less-risk\/?utm_source=marketriders&amp;utm_term=2014-09-11-buffett-invest-stocks-forever\/\">ensure a long-term gain<\/a> in almost any outcome short of bankruptcy or global catastrophe.<\/p>\n<p>So why doesn&#8217;t everyone do what Buffett does? Some try, of course, but the reality is that not very many people have his resources, his people and his expertise. Nor can they negotiate from his position of financial strength.<\/p>\n<p>So they just pick a bunch of\u00a0stocks and hope they get it right. Or they pay a manager to do it for them and pay hefty fees for the privilege.<\/p>\n<h2>Buffett edge made easy<\/h2>\n<p>Yet you can approximate Buffett&#8217;s &#8220;own stocks forever&#8221; idea and his allocation philosophy easily and cheaply:\u00a0<a title=\"Ben Stein: Index Funds \u2018Overwhelmingly\u2019 Superior\" href=\"https:\/\/www.marketriders.com\/investing\/ben-stein-passive-investing-overwhelmingly-superior\/?utm_source=marketriders&amp;utm_term=2014-09-11-buffett-invest-stocks-forever\/\">Just buy index funds<\/a>.<\/p>\n<p>When you own the market through an index fund, your holding period is forever in practice, since the fund is 100% invested, all the time. It&#8217;s also smartly allocated across hundreds and even thousands of stocks at a very low cost.<\/p>\n<p>When you are young, you own more of the market. As you get older, you dial back your exposure (but not to much!). This brings you the market return while <a title=\"You Can Retire Rich Without High Risk\" href=\"https:\/\/www.marketriders.com\/investing\/can-retire-rich-without-high-risk\/?utm_source=marketriders&amp;utm_term=2014-09-11-buffett-invest-stocks-forever\/\">limiting your risk<\/a> of falling below the long-term returns of bonds, real estate or cash.<\/p>\n<p>Rebalancing periodically, you reinvest all dividends, interest and short-term gains. This <a title=\"Compound Interest: Grow Your Retirement Lily Pads\" href=\"https:\/\/www.marketriders.com\/investing\/compound-interest-grow-retirement-lily-pads\/?utm_source=marketriders&amp;utm_term=2014-09-11-buffett-invest-stocks-forever\/\">supercharges your portfolio through compounding<\/a>. That&#8217;s how owning, rather than trading, gives you the Warren Buffet &#8220;forever&#8221; edge.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Warren Buffett is famous for saying that his favorite holding period for stocks is &#8220;forever.&#8221; Like many of his quips, it&#8217;s good for a laugh but also contains a kernel &hellip; <a href=\"https:\/\/www.marketriders.com\/investing\/like-buffett-pick-investments-last-forever\/\">Read more <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":8470,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[3],"tags":[55],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v19.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Like Buffett, Pick Investments That Last Forever | MarketRiders<\/title>\n<meta name=\"description\" content=\"Here&#039;s how you can put the 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