This Simple Strategy Has Never Lost Money (But Here’s Why Most People Fail…)

Believe it or not, there’s a simple investment strategy that has never lost money in the stock market.

I’m not kidding: a six-decade-long study by Oppenheimer actually proves it.

This free stock market advice that I’m about to share is not flashy. It’s regularly ignored, and it’s often belittled by “active” fund managers (who coincidentally seem to underperform the market year after year).

You ready? The truth is, you don’t have to trade every day, every week, or even every year to beat the market. In fact, your odds for success actually increase the fewer trades you make and the longer you hold.

Let me explain…

Buy-and-Hold Leads To Better Returns

buy and hold, forever stocks, long investing

The proof comes from Oppenheimer, who looked at the S&P 500 going all the way back to 1950. Over that time, the S&P 500 has NEVER suffered a loss over a 20-year period.

The same can’t be said for investors who hold stocks for just a year or two. The research shows that when you hold stocks for a short period of time, your odds of losing money are much higher. And you can lose a boatload of money in a hurry. In fact, in its worst one-year period, the S&P 500 dropped 44.8%.

Just look at the chart to the right, which is based on this research. From 1950 to 2010, on a rolling annual basis, the S&P 500 dropped 16 times over a one-year period going back to 1950. But it posted a loss zero times in any 20-year period.

Sadly, while all the evidence points to longer holding periods being better for your portfolio, most investors are doing the exact opposite. Investors once held stocks for an average of eight years in 1950 according to Ned Davis Research. Today, it’s just a matter of months.

You could choose to join the average investor in ignoring these facts, but the trend is clear. The longer you hold an investment, the better your chances of making money.

Now, before I go on, I should note a few things.

You you can’t just buy any stock and expect to come out ahead. We all know about examples like Enron and WorldComs, where investors lost everything. But the market is also littered with big names that go nowhere for years, like General Motors and IBM.

Holding forever didn’t matter a lick with them.

What you want to find is a handful of companies that enjoy huge (and lasting) advantages over the competition. Find companies that pay their investors each and every year by dishing out fat dividends. And find companies that continually plow money back into innovation to stay ahead of the crowd.

These are the kinds of companies that make you money over the long haul – through good times and bad.

Why Most People Can’t Hold “Forever”

Warren Buffett has long said his favorite holding period is “forever,” and for good reason. Many of his best-performing holdings are the result of gains that have compounded year after year.

A long-term, buy-and-hold stock strategy takes patience. But it is simple and has been proven over long periods of time. So if you want to make money in the market, skip the day trading and focus on a timeless strategy that will help you sleep better at night and collect reliable returns over the long haul.

I know it sounds so stupidly simple. But the truth is most of us will never get to this level of zen-like patience with our holdings. There’s always the harrowing thought… What if we are holding an absolute dud in our portfolio that never does anything but lose money?

I also realize that holding during periods of extreme market volatility is easier said than done. We only need to look back to the dot-com crash, the financial crisis, and more recently the Covid-19 selloff, to remember how tough it is to hold on when the world seems to be turning upside down.

Closing Thoughts

That’s why I tell my premium readers over at Capital Wealth Letter that “buy-and-hold” investing is a bit of a fallacy. Sure, it works – but the trouble is most people don’t even try it. The sad reality is that most of us simply aren’t built (psycologically) to hold a stock for 20 years.

But what I want you to take away from what we’ve covered today is this…

If you’re one of the lucky folks who find themselves sitting on a stock like this, congratulations! Chances are it’ll be a long-term winner (if it’s not already). The best course of action at this point is to simply hold tight and watch the returns grow year after year.

If not, then look for stocks with the traits I mentioned above as a starting point for your research. I know the guidelines are a little broad, but don’t overthink it. In fact, the Berkshire Hathaway portfolio is a good place to start…

But more than anything, practice the “hidden” disciplines of investing that most individuals too often ignore. I’m talking about patience, allocation, cutting your losers short, and letting your winners ride. Because while stock picks are important, it’s what you do next that will more than likely determine how much you make over the long-term.

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