Why does Warren Buffett advocate holding stocks forever?

I’d love to have the wisdom and understanding of Buffett, but let’s face it very few have been blessed with anything close to his investing knowledge. All I can do is try to explain what I gather about Buffett from my personal experience of learning about him through books, his annual reports, talks he’s made, and his insightful quotes.

There are huge tax advantages in regards to long term capital gains. Buffett also prefers to buy good and safe companies that produce good returns for years. He’s in the long game and he’s willing to forego a quick gain for a long relationship and steady long-term earnings.

He also has to think about many people when he’s investing, because all of these people depend on his decisions. So the safe long-term route is more appealing to him.

Additionally, by holding these companies long-term, his investments have to opportunity to experience the effect of compounding, while at the same time, not being taxed.

I also agree to buy companies for the long-term. But my thinking is that I have more flexibility as a single investor to make more frequent gains by taking advantage of surges and dips in price.

In addition, as an individual investor, it’s all my money, so I don’t have to worry about share holders, etc.

Buffett has said that there are so many companies that he would like to invest in, but he’s limited because frankly he has too much money to invest. Therefore, he is somewhat limited to only buying these mega companies. As individual investors, we have much more freedom, albeit less money 🙂

Hope this info is helpful.
-Grant

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