Which of the following categories of investors involves buying stocks and holding them for a long period?

Prepare for the CMT Level 2 Exam with our quiz. Study with flashcards and multiple choice questions, each with hints and explanations. Get ready to excel on your path to becoming a Chartered Market Technician!

The category of investors that involves buying stocks and holding them for a long period is referred to as "buy and hold." This investment strategy is focused on purchasing stocks with the expectation that their value will increase over time, allowing the investor to benefit from long-term growth in the stock’s price. Investors using this approach tend to conduct thorough research before acquiring assets, aiming for companies or ETFs they believe are fundamentally strong and can appreciate over several years.

The buy and hold strategy often aligns with the philosophy of taking advantage of compound growth and minimizing transaction costs associated with frequent trading. This approach contrasts with others, such as swing trading or day trading, where investors look for short-term opportunities to capitalize on price fluctuations and typically do not hold positions for extended periods. Position trading, while also a longer-term strategy, refers more to trades based on where the trader believes the price will move over a span of days to weeks, rather than the long-term investment mentality of buy and hold.

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