What investment strategy involves buying and holding a diversified portfolio for a long period?

The buy-and-hold strategy is characterized by the practice of purchasing a diversified portfolio and maintaining it over an extended period, regardless of market fluctuations. This strategy is based on the belief that, over time, investments tend to appreciate in value, and that short-term volatility will not significantly undermine the long-term performance of a well-chosen portfolio.

Investors employing this strategy typically focus on the fundamental strengths of their investments, such as the underlying companies' financial health and growth potential, rather than attempting to predict market movements or trends for quick gains. This long-term approach can reduce transaction costs and alleviate the stress associated with constantly monitoring the market, making it an appealing option for many individual investors and institutions looking for capital appreciation over time.

In contrast, market timing and active trading involve making frequent changes to a portfolio in response to market conditions, which can lead to higher transaction costs and increased stress. Short selling, on the other hand, is a different strategy focused on profiting from declines in asset prices, rather than building long-term wealth through appreciation. This further highlights the unique characteristics of the buy-and-hold strategy as a method for long-term investment.