A frequent question I hear is, “How long should I hold a stock?” The simple yet inconclusive answer is, “It depends on your goals and strategy!”.
So, I decided to perform some research on this question to get a more detailed answer.
According to my research, during a bull market, investors should hold a stock for between 50 and 300 days to allow profits to develop optimally. The ideal hold time for swing traders is 45 days for an average profit of 30%.
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 backtested systems is 30%, and the hold time is an average of 45 days.
How Long Does It Take To Make Money From Stocks?
Typically, stock takes 300 to 600 days to appreciate significantly in value. My research shows that Apple Inc. has increased by 447% over the last five years. 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%. Also, Apple stock’s longest winning streak was only nine days.
The lesson is that very few people get rich overnight from buying Apple or any other stock. The majority of people accumulate wealth by holding stocks for years.
| Apple Inc. Stock Price Trend 5 Years to 2023 | 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 profit you or if you believe it has reached its maximum profit potential. Perhaps you are losing money on the trade, the stock price is in a severe downtrend, or institutional stock analysts are giving it negative coverage.
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 annually.
Buying stocks in high-growth companies still means letting 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 at least ten years, as the US markets have always made a profit over ten years since 1955. My research shows that over the last ten years, the S&P 500 increased 55% of the time by an average of 0.2% per day, and the longest uninterrupted uptrend was eight 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 one year. If you cannot select stocks that exceed the underlying index’s returns, then you should 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.
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Patience in the Stock Market is Golden.
Be patient with the stock. Give it time to make you the profit you desire. A good move in the market takes time to develop. Find out when the best time to buy stocks is.
But beware, stocks can fall quickly; do not let your loss become 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 stopping losses, see the Liberated Stock Trader PRO Training.
FAQ
What Does Hold Mean in Stocks?
The term "Hold" has two meanings in stocks. When a stock rating agency rates a stock as Hold, they believe the stock is fairly valued and 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 it in the belief that you can buy it back at a lower price, profiting from the price differential.
Can You Buy and Sell the Same Stock Repeatedly?
Yes, you can repeatedly buy and sell the same stock in many countries. 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 five days if you do not have an account balance of over $25,000.
Can You Hold a Stock Forever?
We do not live for eternity, so holding a stock forever would be impossible. However, if a company remains listed on the stock exchange and 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 Buffett famously said, “Our Favorite Holding Period is Forever.”
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So basically you need quite a lot of money in the account to shoulder the burden of a significant loss before the stock rises in value, for a “pendulum” effect for above and below your breakeven, with hopeful limited swing up when buying and down when selling. It does still seem to be gambling but based on educated guesses from news, not a “safe” way to make money when you put your savings at risk
Hi James, I just made a huge update to this article, let me know if you think it explains things better.
Barry
excellent advise, but also depends on the state of the market. Last December I had to take profits far more quickly or lose all profit