What investment strategy should investors pursue? Should investors employ a buy-and-hold strategy whereby they buy stocks and hold on to them for a long period or should they be active investors constantly buying and selling stocks? The latter strategy implies that investors discern movements in the business cycle, whereas the former implies that investors ignore short-term fluctuations and are more interested in the long-term trend of economic growth. What my study of financial history has taught me is that over the long-run, a large proportion of portfolio returns come from dividends and reinvesting those dividends in your portfolio. Click here to read a piece by Tim Hartford which discusses the investment performance of Neil Woodford, someone who has taken a long view on stocks and been very successful.
