An important question that many stock market investors ask themselves is, “How long should I hold a stock?“. I will provide you the answer to this question based on my original research and statistics.
How Long Should You Hold A Stock?
The best rewards on a stock are typically with a hold time of between 50 to 300 days. It takes time for good profits to develop, and they certainly do not happen overnight, unless you are fortunate. The typical high-profit trade in my back-tested systems is 30%, and the hold time is an average of 45 days.
How Long Does It Take To Make Money From Stocks?
Typically it takes 300 to 600 days for stock to appreciate significantly in value. My research shows that over the last 5 years, Apple Inc. has increased 447%. However, Apple’s stock has averaged +0.78% on a positive trading day and averaged -0.74% on a negative day. Apple’s stock price only increased 54% of the time while decreasing 46% of the time. Also, Apple stock’s longest winning streak was only 9 days.
The lesson here is that very few people get rich overnight from buying Apple stock or any other stock. The majority of people accumulate wealth from holding stocks for years.
|Apple Inc. Stock Price Trend 5 Years to 2021||Statistics|
|Average Daily Price Increase||0.78%|
|Average Daily Price Decrease||-0.74%|
|Total Stock Up Days||683|
|Total Stock Down Days||572|
|Up Days %||54.42%|
|Longest Uptrend (Days)||9.00|
|Longest Downtrend (Days)||8.00|
When Should I Sell a Stock?
You should sell a stock when you stop believing it will make a profit for you, or if you believe it has reached its maximum profit potential. Perhaps you are making a loss on the trade, the stock price is in a severe downtrend, or it is receiving a lot of negative coverage from institutional stock analysts.
A good reason to sell a stock is if the business fundamentals have changed since you made the initial investment, such as newer, better industry-disrupting products from competitors, or simply a significant drop in sales or profits.
Is Holding a Stock for a Year a Good Strategy?
Yes, holding a stock for a year is a good strategy according to many popular strategies, such as the Joel Greenblatt “Magic Formula”, Buffett’s Value Investing methodology, the Dogs of the Dow, or my research on the “LST Beat the Market System“. Successful investing strategies usually mean a recalculation of the stock selection performance on an annual basis.
Buying stocks in high growth companies still means you need to let your investment mature for at least one year.
How Long Should You Hold a Losing Stock Before Selling?
There is no exact answer to this question; there are three scenarios. Firstly, sell a losing stock if you can no longer afford to shoulder the losses. Secondly, stop holding a losing stock if it hits your pre-established stop-loss and risk/reward ratio. Finally, many people will hold on to a losing stock to offset it against tax at the end of the year; this is called Tax Loss Harvesting.
How Long Should I Invest In The Stock Market?
You should invest in the stock market for a minimum of 10 years, as the US markets have always made a profit over a 10 year period since 1955. My research shows that over the last 10 years, the S&P 500 increased 55% of the time, by on average 0.2% per day, and the longest uninterrupted uptrend was 8 days. This means you should invest for the long-term.
A Logical Stock Profit Taking Strategy
My research shows that, as an investor, the most logical stock profit-taking strategy is to sell a stock when it fails to match or beat the returns of the S&P500 over a one year period. If you cannot select stocks that will exceed the returns of the underlying index, then you should simply buy an index-tracking ETF.
According to my research using StockRover, out of 7,500 US stocks, only 851 companies with a market capitalization greater than $1 billion beat the S&P 500 index in 2020. The average increase of these stocks was 48%. This means you have a 13% chance of selecting a stock that will beat the market.
What is the Minimum Time to Hold a Stock?
As a day trader, you may only hold a stock for a few minutes or hours. For investors, the minimum time to hold a stock is until it begins bearing fruit and returning a profit. However, you may choose to sell sooner if the stock exceeds your risk tolerance and begins to generate significant losses.
The Original Research in This Article Was Performed Using Stock Rover, the Best Stock Research Software & Our Valued Partner.
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Patience, in the Stock Market, is golden.
Be patient with a stock. Give it time to make you the profit you desire. A good move in the market takes time to develop. Longer-term great investments have made thousands of percent; look at Netflix 5 year return in our FANG Stocks Guide.
But beware, stocks can fall quickly; do not let your loss turn into a catastrophe. Limit your losses, but do not set your stop losses too tight, for example, 5%. A stock could pull back 10-15% before a big upward profitable move occurs. A typical losing trade can develop within 10-12 days.
For expert strategies on Stop Losses see the Liberated Stock Trader PRO Training
What Does Hold Mean in Stocks?
The term “Hold” has two meanings in stocks. When a stock rating agency rates a stock as Hold, it means they believe the stock is fairly valued and it will maintain its value proposition. The alternative meaning is that you “Hold a stock”, which means you are the beneficial owner of shares in a company, having purchased them directly or through a brokerage account.
What Does It Mean To Be Long On a Stock?
If you are “Long” on a stock it means you own the stock with an expectation that it will increase in value, therefore returning you a profit for your investment. This is the opposite of shorting a stock, meaning you are selling a stock in the belief you can buy it back in the future and a lower price, profiting from the price differential.
Can You Buy and Sell the Same Stock Repeatedly?
Yes, you can buy and sell the same stock repeatedly in many counties. In the USA, you may be subject to the Pattern Day Trading rule, which restricts you from repeatedly buying and selling the same stock within a 5 day period if you do not have an account balance of over $25,000.
Can You Hold a Stock Forever?
As we do not live for eternity, holding a stock forever would be impossible. However, as long as a company remains listed on the stock exchange and remains in business, you can theoretically hold the stock and pass the ownership on. Considering that 95% of companies go bankrupt within 100 years, it is probably not of great concern.
Warren Buffet famously said “Our Favorite Holding Period is Forever”