TheRiskBlog

Maybe you’ve already heard the advice given to investors, who want to buy stocks:
“Look for a company you believe in”.
Investors should understand the products and the company they invest in. They shall also be sure that it is successful in its sector. If the investor discovers a company like that, he should buy its stock and let it work for him.

Like Kostolany said: “Buy stocks, take sedatives, go sleep for 10 years and then check again”.
(That is kind of a classic “Buy and Hold” strategy)

I thought about whether such a strategy could be helpful or not. I for myself don’t buy stocks and go asleep for ten years. I consider this strategy pretty dangerous because by acting like this you give up control over your investment. And last year we saw how fast stocks can give up gains that they’ve made over years.
I keep track of my stocks nearly everyday and I must say that I own most of them only between a few hours to a few weeks. I can immediately downsize, upsize or sell them completely if I want to take profit or to cut losses. That’s a big advantage over the buy and hold strategy!

But on the other hand I do have companies on my Watch-list I truly believe in. I know what they are doing, I consider their products as competitive and I can imagine a bright future for those companies.
Anyway, I don’t buy and hold stocks from them. I only buy stocks if the market confirms my ideas. And I don’t hesitate to sell a stock or trade it short, if its trend isn’t stable.

By choosing this strategy, you are no victim to the company’s stocks moving, you maintain control over your investment. There is no reason for you to stay with stocks that can´t gain , but only block your capital ( that you should be rather investing in better stocks.)
But if the stock of your favourite company finally begins to trend, there will be enough time to jump on in this train of success and obtain its gains.

In that perspective it is very helpful to know one or two things about a company and follow it when the opportunity is there.