Which of the following strategies has shown the highest return over a period of years?
1. Moving frequently in and out of the stock market to avoid downturns and exploit upturns.
2. Avoiding stocks entirely by keeping money in federally insured bank accounts.
3. Buying and holding onto a varied set of stocks, ignoring short-run fluctuations.
Answer:
3. Over long periods of time, buying and holding onto a varied set of stocks has been shown to be the best-returning strategy. However, it does call for the investor to disregard short-term reductions in stock values, which frequently occur.
