What’s On Our Minds:

As sure as the sun will rise in the east and set in the west, the stock market will go up and it will go down. Rather than getting caught up in these daily fluctuations, the investment professionals at Tufton Capital believe that a long-term buy and hold strategy is the safest and smartest way to build wealth. A disciplined adherence to this philosophy has proven time and time again to return exponential gains on invested capital, regardless of how the market is feeling on any given day.

Cultivating Your Portfolio

The term “buy and hold” doesn’t mean investing and forgetting about your portfolio for the next 20 years. There are ways to cultivate and prune your portfolio while still maintaining a long-haul investing strategy. For instance, if a company you invest in changes fundamentally, you may not want to continue owning that security. If the overall market changes dramatically, as it has in the past, you may actually benefit from selling an investment or group of investments. Finally, changing goals as you get closer to retirement may warrant a more conservative portfolio.

Bad Markets

The typical investor is tempted to get out of a bad market by selling when prices are low, which is a poor strategy. The economy fluctuates between good and bad all the time, and those who constantly buy and sell will be hit the hardest in a bad economy. By holding on to your investments, you’ll be better able to ride out a down market, especially if your portfolio is diversified.

Taxes and Fees

Frequent trading results in higher fees, so long haul-investors pay less while fees eat up much of a day trader’s profits. Additionally, short-term gains are taxed at a higher rate than long-term gains. Even if you have the fortune of timing the market successfully, your profits will be diminished by taxes and fees.

Investing for the long-haul is the best investing strategy for the majority of investors because it not only ensures modest gains but is also less likely to yield major losses. A long-haul investment strategy is based on informed, careful decision making and patience.

Last Week’s Highlights:

The Bureau of Economic Analysis released its GDP estimate for the second quarter of 2018, placing growth at 4.1% — the highest since 2014. Though there are a few one-time factors that have brought that number up, such as soybean and aircraft exporters rushing product out before retaliatory tariffs went into effect, increased spending by both businesses and consumers was the main driver. Indices flipped the familiar script last week, with the Dow posting the biggest increase and the NASDAQ losing just over 1%. The tech-heavy composite index came down from record highs after weak earnings reports and cautious guidance from Twitter, Intel, and Facebook, with the latter having the biggest single-day loss in value in the history of the stock market. Each of these tech giants experienced double-digit percentage losses in share price as spooked investors fled the technology sector. In a win for free trade, President Trump and the head of the European Commission agreed to working toward a zero-tariff solution, temporarily sidelining auto import taxes until a more detailed deal can be worked out.

Looking Ahead:

Earnings season is finally beginning to wind down, hopefully bringing some level-headedness to the markets. It’s not over yet, though, as big names like Apple, Caterpillar, DowDuPont, Procter & Gamble, Volkswagen, and Kraft Heinz report this week. The Federal Reserve, the Bank of England, and the Bank of Japan all have meetings before taking most of August off, making the next few days some of the most significant of the season in terms of macroeconomic policy news. Consumer Confidence and Employment reports are due by the end of the week, which, coupled with last week’s GDP numbers, should inform the Fed’s decision whether to raise rates again soon.