What makes the buy and hold strategy so difficult for investors? There are plenty of articles written about this subject. You can read about it here, here and here.
To sum it up, not many people can withstand the short-term pain for the long-term benefit.
But what if part of the problem with the buy and hold strategy is the name itself?
The buying part is pretty simple, you purchase a security you believe will have a positive outcome. It’s the holding part that gets messy.
Here are some definitions of the word “hold”.
What do most of these have in common?
The object that is being held wants to be somewhere else. The person doing the holding is controlling the objects movement. The act of holding onto something means we want to keep it in place, in it’s current form.
Market prices fluctuate on a daily basis, so the very act of holding onto a stock, mutual fund or ETF is impossible. We have no control over which way the market will move. And so, frustration ensues. Anxious feelings arise such as, “shouldn’t we be doing something?” or “what if this thing goes to zero?” Letting these feelings linger can wreak havoc on an investment plan and the investor’s psyche.
In the book “Living in the Sweet Spot” author Amy Baltzell, a sport psychologist, uses examples of athletes shifting negative emotions to mean something different. Notice, it’s not getting rid of negative emotions, there must be willing acceptance.
The key to not giving into these emotions is to change how you appraise them. Baltzell credits Richard Lazarus, a leader in understanding emotion, with the phrase, “change the meaning, change the emotion”.
Baltzell writes about several top performing athletes experiencing sweaty palms, increased heart rates, tightened muscles and a general sense of uneasiness before competing. Sound familiar? Instead of letting these emotions beat them, these athletes have trained themselves to believe that these feelings are a sign that they are ready to compete rather than a sign of fear or weakness.
When you get anxious or scared about your long-term investments, maybe that could actually be a sign that your strategy is doing what it’s supposed to do. Baltzell recommends having a pre-planned, go-to phrase for yourself during these anxious times. Instead of thinking about “holding” an investment, think of it as “practicing patience”.
This thought of “practicing patience” also gets rid of the implied set-it and forget-it mindset that comes with buy and hold. This mindset generates the uncomfortable passive feeling of doing nothing. Thinking about it as “practicing patience” makes us feel more active. We’re not doing nothing, we’re practicing patience.
Buying and holding seems easy in theory, it’s anything but. It requires a rock-solid belief in the investment. And the investor must have the ability to nudge themselves away from action when the feelings of anxiety and fear arise. And they will arise. Maybe the answer lies in changing the label of “buy and hold” to “buy and practice patience”.
