What portfolio strategy predominantly uses a buy-and-hold investment style?

The buy-and-hold investment style is a characteristic of passive portfolio management. This approach involves acquiring investments and holding them over a long period, regardless of market fluctuations, with the belief that the market will generally trend upward over time. Passive portfolio management does not engage in frequent trading or attempt to time the market, which distinguishes it from other strategies like active portfolio management and market timing that seek to capitalize on short-term price movements.

In passive management, investors typically invest in index funds or broad-based ETFs that aim to replicate market performance rather than outperform it. This strategy leads to lower transaction costs and tax efficiency, as there are fewer trades over time, aligning well with the fundamental belief of buy-and-hold—investing for the long haul without actively managing the portfolio.

Understanding that active portfolio management entails selecting individual securities and attempting to outperform a benchmark through various strategies and that market timing approaches involve making investment decisions based on forecasts of future market movements helps clarify why passive portfolio management is the right answer. Similarly, strategic asset allocation, although involving long-term planning, may adjust allocations based on market conditions and does not strictly adhere to a buy-and-hold philosophy. Thus, passive portfolio management is the strategy that prominently features the buy-and-hold investment style.