The analysis incorporates the net value realized after the second year which is derived from the proceeds from the stock's sale, total taxes paid and, in the case of a buy-and-hold strategy
, the cost of financing to fund the exercise price and tax withholding.
The buy-and-hold strategy puts you in a position to profit from this long-term upward trend of the stock market.
One particularly beneficial aspect of the buy-and-hold strategy is the compounding effect that a dividend reinvestment plan can have on your return.
Indeed, the buy-and-hold strategy is largely passive, but it should not be thought of as a synonym for what some people jokingly call the "buy-and-neglect" strategy.
The buy-and-hold strategy has proved to be one of the most convenient ways for small investors to get started in stocks.