How Long Should You Hold a Stock?

How Long Should You Hold a Stock?

The functioning of the share market and the whole selling and purchasing process are as unpredictable as the future. Understanding the share price and its volatility is impossible. Every traded stock has its volatility and operates in a particular way.

Therefore, it might be challenging to determine the bare minimum of time for which one should keep the stock. Whatever stock the investor or trader chooses to invest in or just chooses for trading may rise the following day, boosting the gains, or it could simply go out of business, leaving losses in its wake. This is precisely why you need to know when and how long you should keep your chosen stocks.

The entire investment horizon depends on your choices about your equities and the state of the market at the moment. On the other hand, if you believe you can resolve matters through short-term investment, you are certainly good to go. Let’s now discuss how long you should hold a stock in your portfolio. 

How long should you hold a stock in your portfolio?

It all depends on you, just like every other choice you make during your investing and trading period, from selecting a possible stock to determining how long you want to hold on to it. Everything relies on your investing methods and any future ambitions you have in mind. In contrast, a fundamental trader may find a long-term investment more profitable and favorable, according to discussions with specialists and international investors.

In the stock market, long-term refers to ideally owning and holding onto a stock for a few months or, if everything goes well, a few years. Additionally, it is discussed and clarified that owning a stock for a short period is considered speculating rather than investing, which raises your possibilities and dangers of losing money over the long term.

Ultimately, your gains and losses will be determined by your market strategy, investing philosophy, and the period for your stocks. There is nothing to worry about regarding the short-term changes the market creates if you are the purchase-and-hold sort of investor and hold onto a stick for lengthy periods.

Short-term market changes are standard and should be handled cautiously, as investors frequently sell their positions when they experience losses out of fear. At that point, people begin to act emotionally and think irrationally, which hurts their long-term profit-making plan. When you let your emotions get in the way, this is referred to as a victim of market sentiment.

It is often advantageous for traders and investors to stay on the stock for an extended period, however, this isn't always the case. There are occasions when the market drops too severely, causing a significant decrease in your investment levels. You should be confident that, ultimately, the market will rebound, and your investment will do the same.

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Table of Content

  1. How long should you hold a stock in your portfolio?
  2. When Should You Sell Stocks? 
  3. Benefits Of Long-Term Stock Holding
  4. Conclusion

When Should You Sell Stocks? 

Booking profits when unrealized gains exceed 20–25% is seen as a winning wager in typical market circumstances. If you believe the stock has reached its uptrend potential, you could consider closing out your open position. Either fundamental analysis or technical indicators can be used to assess this. Alternately, if your perception of the stock has changed over time and you no longer believe it to be a wise investment.  

It is also essential to remember that, despite short-term fluctuations in stock prices, the market has historically produced positive returns. For instance, if a shareholder bought HDFC Nifty 50 ETF in 2015 for Rs 71 and held it till now, the gains would be more significant than 170%. Currently, the HDFC Nifty 50 ETF trades at about Rs 193. 

Benefits Of Long-Term Stock Holding

We have already made it apparent that owning stocks for longer is preferable to holding them for a short period. So let's quickly go through some advantages of holding a stock for a long time.

  • When investors strive to hang onto their assets and schedule them appropriately, long-term investments nearly always result in more significant gains and profits and beat the market.
  • The second benefit of owning a stock for a long time is that it is less expensive. As a result, holding equities in your portfolio for a long time becomes more cost-effective as you incur fewer fees the longer you hold the stocks.
  • Compound interest is now computed based on the principal balance of your stock portfolio. Therefore, over time, any interest or dividend that accumulates in your portfolio is compounded, increasing the balance in your account over the long term.
  • Gains accrued on securities kept for a long time or more than a year are only taxed at a maximum rate of 20%. Short-term handles and holdings must pay around 37% of the tax on their investment for any gains.

Conclusion

The choice of how long you should hold a stock is complicated and is influenced by several variables, including investment objectives, risk tolerance, market conditions, and personal circumstances. It's okay to sell your investments and leave if you ever have second thoughts about your ideas on the chosen stock or your investment in general. The approach that you employ and believe to be preferable in the long run ought to be used. 
You may successfully manage the constantly shifting dynamics of the stock market by periodically assessing and tweaking your investing plan while considering your financial objectives. You may use cutting-edge technologies like the blinkX share market app to manage your shares. You may efficiently utilize this user-friendly software, which gives you access to everything you need to stay informed, make transactions quickly, and successfully manage your financial portfolios.

How long should you hold a stock FAQs

The probability that you will be able to withstand market downturns increases with the length of your investment. Compared to assets with lower short-term volatility risk, long-term returns are frequently higher for assets (like stocks) with higher short-term volatility risk.

Holding stocks for a long time can be lucrative, but risks are involved. Shifting market circumstances and industry dynamics may affect a company's performance and stock price.

If the stock's quarterly sales exhibit an increasing tendency, you can buy and hold it. If the Company's earnings have been less than anticipated in future quarterly reporting, you might consider selling the shares.

Stock may be kept indefinitely, in principle. But you must constantly examine the stock's performance and revise your investing thesis. 

Short-term trading can be rewarding for investors adept at timing the market and profiting from swift price changes.