Stock prices are easy to monitor; let's reflect on the long term stock prices.

Here is a theoretical analysis of the behaviour of prices of stocks over a 5 or 10 year period.

Stock prices are easy to monitor.  Over a long period, these stock prices in general reflects the value of the underlying business of the stocks.

These stocks can be grouped according to the behaviour of their prices in these broad groups.

1.  Some stocks performed very well.  Their prices climbed consistently and those who have these stocks enjoy good returns from capital appreciations.

2.  Many stocks performed so-so.  Their stock prices stayed within certain ranges, either broad or narrow.  These stocks did not reward their owners well in returns from capital appreciations.  Those who bought these stocks at low prices might have a small gain, but over many years, these translated to very poor compound annual returns.  Those who bought these stocks at high prices might have irrecoverable losses.  Owning these stocks carried with them opportunity costs, provided the dividends were substantial to overcome these.

3.  Many stocks performed terribly.  Their stock prices declined and continued to decline further over many years.  These stocks caused massive losses to those who own them.  The dividends they provided, if any, were poor compensation to these severe losses.

4.  Many stocks performed very well for a few or many years and then declined when they no longer were able to protect their businesses against competitors or for various other reasons.  Some rose again from the ashes, many faltered into obscurity or permanent demise.

5.  Many stocks performed poorly for many years eroding the patience of their owners.  Some might perform intermittently, though many remained in such states for many more years.

The best stocks to have are those in Group 1.   To capture all the returns from such stocks over a long period, buy and hold is the right strategy.  These stocks are few in number in any bourses and often trade at high valuations.  The ability to pick and buy these stocks at fair or bargain prices will be very rewarding.

Buy and hold strategy is definitely not ideal for the stocks in the other groups.  At best, it provides a meagre or average return in one's investment.   However, holding non-performers or losers over a long period of time compounds the losses further due to opportunity costs.