Trade Stocks Now, Buy and Hold Stocks for Retirement

I (RAH) "retired" in 1993 at age 53. I was sick of the endless meetings, inept management, arbitrary decisions and make-work projects that governed my life as a technical writer at the now defunct Digital Equipment Corporation (DEC's remnants live as part of Hewlett-Packard (HPQ), so I engineered my layoff and began to trade stocks for a living.

Thanks to an upside market, hard work, a helpful broker and some luck I managed to pay my bills from trading profits until I stopped trading in late 2000. Since then, I have lived off of savings, dividend income, stock sales, a small pension and Social Security.

In the early 1980s, long before I departed the real work world, I started to buy and hold stocks for the long run. I accumulated over thirty dividend-paying stocks of well-known companies including Colgate-Palmolive (CL), Wrigley (WWY), IBM (IBM), Phizer (PFE), a bunch of electric and gas utilities, and a few real estate investment trusts (REITs). My strategy was to hold these stocks for the long run, reinvest all dividends to accumulate extra shares without laying out any new money and buy additional shares with new money when prices dipped significantly.

Again, thanks to a multi-year upside market and some good stock picks, my buy-and-hold account grew slowly, but consistently, year after year. Like most stock portfolios, it took a hit after stocks peaked in 2000, but I owned few over valued technology stocks and the dividends cushioned much of the price downside.

This two-pronged approach has served me well. I was able to make a living for seven years from trading while, at the same time, accumulate wealth through capital gains and dividend reinvestment in my buy-and-hold account.

The economy and the stock market are in a different place compared with 1982 through 2000, but sound trading and investing principles have not changed. Trading is still trading and buying great companies for the long run still works. With some luck, you can still have the short-term action from trading and the long-term benefit of accumulating money through patient investing.

Related Articles:

Introduction to Buy-and-Hold
Introduction to Dividend Reinvestment
Why Dividends Matter

Posted December 1, 2007.