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One of the things you can do to improve your overall investment performance is to consider buy and hold. There are a number of pundits that claim that buy and hold investing is dead, but it really isn’t. Sound investment principles never go out of style. And, while I prefer index funds (a la Oblivious Investing), I also occasionally invest in value stocks that I think have good potential.

There are many buy and hold investors that have made headlines for their decision to adopt a long-term investing strategy. Indeed, one of the richest men on the planet, Warren Buffett, is a buy and hold investor. Many long-term investors are still thriving. Even though the current recession is causing some losses, it is important to understand that actual losses are not realized until you sell. The buy and hold investor understands that now is a good time to pick up a few shares, because the stock market will eventually start gaining again. Here are five tips to help you as you consider buy and hold investing:

1. Choose a strategy and keep with it. Many people choose something — like only investing in low-cost index funds or some method of stock picking — and stick with it. The problem comes in when you keep changing it up. Consistency over the long-term is one of the hallmarks of long-term investing. Because the stock market goes up over time, consistency will eventually pay off.
2. Avoid “hot” tips. Instead of chasing after the latest”hot” stock from an “insider” source, concentrate on companies that are established and provide good value. This is another reason I like index funds. You buy shared of an index fund, and stock picking isn’t a necessity.
3. Have the long-term in view. Even for the buy and hold investor, this can be difficult. But you have to look at your time frame. And you have to adjust your paradigm away from the get rich quick thinking that many have when they think about the stock market. Sure, there are people who make a killing with short-term trading and lucky stock picks. But they are few and far between, and many of them are already rich, so they have way  more money to risk.
4. Don’t get too worked up about taxes. Yes, you need to consider the tax implications of your investments. You want to minimize your taxes, but don’t make all of your decisions based on tax advantages. One of the best things you can do is use tax-advantaged retirement accounts to help maximize your earnings. And remember, for the long-term investor, the capital gains taxes are lower than for short-term investors.
5. Realize when you have to let a position go. Buy and hold investing isn’t about just picking something and then blindly sticking with it even after it is obvious that it might not recover. Sometimes you have to realize that it is time to cut your losses and go. Even Warren Buffett adjusts his positions. Long term investing still requires some thought and consideration. (This is yet another reason that I like index funds; you don’t have to worry about when it is time to sell.)

Long term investing can lead to long term success if you have the patience for it.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.