Buy and Hold the Mutual Fund: Simple, Not Easy

When it comes to mutual fund investment, a long-term investment strategy always works the best. This is why renowned investors consider buy and hold mutual funds or passive investing. The strategy allows you to buy and hold mutual funds for a longer period.For long-term goals like building a corpus for retirement or buying a home, buy and hold is a natural fit. It is important to note that any stock for the fund can qualify for this type of investing with a well-researched and diversified portfolio.Here’s why the investment strategy is advantageous for most people

• The trading cost is minimised, which increases the returns on investment.
• The passive investment strategy reduces the “manager risk.” The risk is taken by someone who manages the mutual fund portfolio
• Studies indicate that it is a hard strategy to follow.
• The buy and hold strategy blend well with index fund investing.
• It is based on an intellectual framework, the efficient market hypothesis, which has long since been discredited by the investment community.

Let’s understand buy and hold mutual funds with an example:If you purchased 100 shares at a closing price of Rs.18 per share in January 2008 and you have held the stock till January 2018, during which the price climbed Rs.157. This means you have earned an approximate 700% return in ten years.One of the key takeaways of passive investing or buy and hold mutual funds is it helps to eliminate any turbulence instead of timing the market. Investing can go on for decades. There is no time limit when you’re buying and holding a stock or mutual fund. Even though you buy a security for the long-term, you still need to pay attention to stock price fluctuations and performance.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.