How Long Should You Hold a Stock?

Investing is not an easy game, and it requires a lot of patient minds, time and skillset. If one is willing to contribute time and is patient enough will reap unexpected rewards. Nowhere is it mentioned the timeframe of how long you should hold a stock? It depends on you. But ideally, it is said that you should not sell a stock that is doing good business and has a good market share.

Holding stocks for a longer duration will eventually give you profit only. And also, if you do not need urgent money, you should not sell a stock.

As said by legend, Warren Buffet-

If you cannot hold the stock you are buying today for 10 years, you should not buy that stock.

If you see the portfolio of every great investor in the world, their portfolio will have shares that they bought 10-20 years ago, and they continue to hold the particular stock even today. It would be great for you if you did not jump into the market to buy today and sell tomorrow. Wealth is not generated overnight, and it takes time.

In today’s era, where the expenses are unlimited, and the income is limited, everybody is searching for a means to generate income. They find the stock market an easy way, not knowing the hardships. There will be corrections. Generally, bull markets have a time frame of 2-4 years. The stocks you are buying today may hit the upper circuit only, or they may go down for the next three days consecutively; all you need to do is have trust and patience. It would be good if you had confidence in the company you are investing in.

It would help if you adequately studied the company’s line of business and saw its past performance. If you see any giant stock of any good company in a 10 years frame, you will see it has generated good returns in the long term.

Though there is no ideal time for holding stock, you should stay invested for at least 1-1.5 years.

If you see the stock price of your share booming, you will have the question of how long do you have to hold stock? Remember, if it is zooming today, what will be its price after ten years? You will see times when prices will go up and down because of some emotional factors; you should only focus on the company’s business. Never invest by taking tips, do your research always.

Like a flower takes time to bloom; similarly, a good stock takes some time to bloom and show its colours.

For example, Reliance share price in 2010 was only 576rs, its price is 2400, which is more than 400% profits. Suppose you invested 1lakh rs in reliance in 2010; it would be 4,16,000 today plus timely dividends. That is the result of long-term investing.

It would help if you kept in mind that big money is not made by selling the stock in 2-3 months but by holding it for long. The simple phenomenon you should know while investing in the stock market is that ‘patience is a virtue.

Suppose you see the share price of great companies like TCS, RELIANCE, MICROSOFT, BERKSHIRE HATHAWAY. In that case, you will know that these companies have given impeccable returns to their investors in a more extended period.

The stock market is unpredictable and very volatile. There are times when you will see your share prices daunting; know you should not panic at these times. You should also review your portfolio every three months to know which stocks are performing or not or is there any fundamental change in the company or you need to exit or not. Do not blindly keep the stock for a longer time frame; study the technical and fundamental parameters. There is no defined time of how long you can hold stock.

You have seen the once in a lifetime pandemic fall in nifty, which took nifty to 7500 levels. It recently touched 18500 levels, which is near 150%. In 1.5 years, nifty gave 150% returns, which is exceptional. So, the stock market will give good returns in the long run, but that does not mean every stock will zoom.

Do not let panic or emotional selling give dents on your portfolio. Every stock will give corrections, and how long you should stay depends on your trading style. If you trade in stocks seeing their fundamentals, you should stay for months and years. On the contrary, if you are a technical investor, you should study the charts and trade accordingly.

Do not let your emotions overpower your mind and then take control over decision making. Most of you know that wealth is generated over the years and not in months or days, and stocks need their own time to compound and grow to give you incredible returns.

Advantages of Holding a Stock for Long-Term

Greater Potential Gains: Long-term investments tend to outperform the market and often result in higher profits compared to short-term holdings. By timing your investments wisely and holding stocks for extended periods, you can maximise returns.
Cost-Effective Strategy: Holding stocks for a longer duration is more cost-efficient. As the holding period increases, the total commissions or fees you need to pay reduce, making long-term investments cheaper over time.
Compounding Growth: Your stock portfolio benefits from compound interest over the long term. Any accumulated interest or dividends are reinvested, which enhances the overall value of your portfolio over time.
Tax Efficiency: Gains on stocks held for over one year are taxed at a lower rate, typically around 20%, compared to short-term profits, which may be taxed at rates up to 37%, making long-term investments more tax-efficient.

HOW MUCH DO YOU KNOW ABOUT YOUR STOCKS?

Suppose you invested in a company that gives good healthy returns for months, and you continue to hold. One day it’s share price starts falling, and it is everywhere on the news that the business is not good, and people start panic selling. It would help if you had faith in the company and its business. Every business bumbles once in a while; if there is no significant fundamental change, it is wise that you stick to that share patiently, and eventually, it will give good returns. News is shown to create panic. When the same share starts giving good returns, the business suddenly becomes suitable for that company. It would help if you stayed invested. Patience is a virtue.