Which of the following statements regarding a buy-and-hold strategy is true?
A) Passive investors do not care about what index portfolio to use as they all produce the same returns over time.
B) This strategy is followed only by investors with small portfolios.
C) There is no reinvestment decisions to make under this strategy as all income is simply spent.
D) This strategy produces lower transaction and search costs than active strategies.

Question

Quizplus · Accepted Answer

A buy-and-hold strategy involves purchasing securities and holding them for a long period, which reduces the frequency of transactions. This, in turn, leads to lower transaction costs (such as brokerage fees) and search costs (the costs associated with finding suitable investments), compared to more active trading strategies where securities are bought and sold more frequently.

Which of the Following Statements Regarding a Buy-And-Hold Strategy Is