John Templeton’s investment strategy emphasized the concept of buy and hold. In an article that appeared in World Monitor in February 1993, Templeton remarked that “the stock market is not a casino”:
Invest – don’t trade or speculate. The stock market is not a casino, but if you move in and out of stocks every time they move a point or two . . . or if you continually sell short . . . or deal only in options . . . or trade in futures . . . the market will be your casino. And, like most gamblers, you may lose eventually – or frequently.
You may find your profits consumed by comissions. You may find a market you expected to turn down turning up, and up – in defiance of all your careful calculations and short sales. Every time a Wall Street news announcer says, “This just in,” your heart will stop.
Keep in mind the wise words of Lucien O. Hooper, a Wall Street legend: “What always impresses me,” he wrote, “is how much better the relaxed, long-term owners of stock do with their switching of inventory. The relaxed investor is usually better informed and more understanding of essential values; he is more patient and less emotional; he pays smaller annual capital gains taxes; he does not incur unnecessary brockerage commissions; and he avoids behaving like Cassius by ‘thinking too much.'”
There’s an interesting discussion going on over at one of the Motley Fool’s blogs right now about this very subject. What do you think? Churn and burn or buy and hold?