Two consequences follow mechanically from not selling, and neither requires believing anything about markets. The first is tax. In a taxable account, tax on a gain is generally due when the asset is sold, so an unrealized gain compounds on money that would otherwise have gone to tax. Our page on capital gains tax carries the mechanics and states the same point, that tax is due only on sale so buy-and-hold investors control the timing. The second is cost. A portfolio that is rarely traded incurs few trading costs, and cost is one of the small number of things about an investment outcome that is known in advance. Those two consequences are often presented as evidence that the approach is right about markets. They are not evidence of that at all. They are arithmetic that would hold even if the underlying holdings were poorly chosen.
A third consequence follows just as mechanically, and it runs against the reason most people adopt the rule: holding produces concentration. If several positions are bought and none are ever sold, the ones that grow fastest become the largest, so the portfolio drifts toward whatever has already succeeded. That is not a flaw in anyone's execution. It is what the rule does. The practical result is that a strict buy-and-hold portfolio after twenty years is usually not the portfolio that was chosen at the start, and its risk is concentrated in the holdings that happen to have worked so far. Our page on rebalancing covers the maintenance that addresses this and the trade-offs of doing it in a taxable account. The point that belongs here is prior to that one: the drift is a direct consequence of the holding rule, which is exactly why holding period and diversification have to be assessed separately.
The honest limit of the idea. Because buy-and-hold governs only selling, it cannot improve a poor selection, and it converts a poor selection into a long-term poor selection. It also does not distinguish between the reasons a person might sell. A rule that permits no sales at all is not a plan, because ordinary portfolio management requires selling for reasons unconnected to price, including rebalancing, spending the money for the purpose it was saved for, and responding to a genuine change in circumstances. What buy-and-hold is properly opposed to is selling because a price fell, which our page on panic selling treats as an action with its own diagnostic. The distinction between a sale prompted by a plan and a sale prompted by a price is doing all the work, and "never sell" is a crude substitute for it.
A note on what the phrase signals in practice. Because there is no definition, "buy-and-hold" is used to mean anything from an index fund held for a lifetime to an individual stock nobody has looked at in a decade. When someone describes themselves that way, the informative follow-up questions are what they hold, in what proportions, and what would make them sell. The answers to those questions are the portfolio; the holding rule is one attribute of it.
