Unlike a lot
of market theories that have no foundation in reason or fact, buy and hold investing works because, as Keynes identified many years ago,
corporations do not as a rule pay out all their earnings in dividends or
share repurchases.
Also, pass - through tax treatment (which had already applied to sole proprietorships and partnerships) meant that owners had to pay tax on the income as it was earned,
unlike the shareholders
of C
corporations who, in the words
of Tax Foundation economist Kyle Pomerleau, «can defer the taxation on their
share of corporate income as long as the
corporation retains its earnings or if the shareholder does not realize a capital gain on his stock.»