How Long Should You Hold a Stock?

20 May 2024
5 min read
How Long Should You Hold a Stock?
whatsapp
facebook
twitter
linkedin
telegram
copyToClipboard

It is no secret that timing the market for higher returns is next to impossible. The volatile and unpredictable nature of the market makes knowing the minimum time to hold stocks even more complicated. 

Your selected stock might shoot up the day you buy it, or it might turn out to be a loss-making investment. And that’s why you, as an investor, need to plan the holding period while buying the stocks. 

The investment horizon will depend on your investment strategy and approach and also the market conditions. It ultimately comes down to your perception of the market. If you think you can tackle the short-term fluctuations in the market, you are good to invest. 

Generally, stock markets tend to trend upward in the long term. Therefore it makes sense to invest for the long term if your goal is wealth appreciation. Buying and selling stocks for short-term profits is more speculation than investing. 

Warren Buffet once said: “If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.”

When to Sell a Stock

When to buy and sell stocks is a common query faced by stock market trader.

In normal market conditions, booking profits when unrealized gains are more than 20-25% is considered a winning bet. However, you may consider exiting your open position if you think the stock has reached its uptrend potential. This can be analysed either via fundamental analysis or through technical indicators. Alternatively, if your opinion about the stock has changed over time, and you no more think of the stock as a winning bet. 

It is also worth noting that stock prices might fluctuate in the short run; but in the long run, the market has given good returns.

📣 IPOs to look out for
View all IPOs
Companies
Type
Bidding Dates
RegularCloses Today
SMECloses 28 May
SMECloses 29 May
SMECloses 30 May
SMECloses 31 May

Why Long Term Investments Are Good

Compounding does all the trick here! 

Staying put after investing in quality stocks will allow compounding to unleash its goodness. If you are invested in stock from lower levels and still find the risk-reward ratios favourable, adding more quantities on dips and averaging out your investments may be considered to reap better returns in the future. 

That said, selling stocks fearing loss or sudden price falls tends to hurt the portfolio. You might save some money in the short run, but you could be giving up on possible multi-bagger returns.  This can be reaped by holding shares for a long period. 

Let’s bring in some facts! 

Examples

Let’s talk about Nifty. Not long back, only a year and a half ago, during the early days of COVID-19, Nifty levels were dwindling and were a point of concern. In March 2020, the market hit circuit levels, and the Nifty tumbled to fresh lows of 7500 points. However, that was a turning point. 

Of course, a once-in-a-lifetime pandemic struck us and changed some things forever, but the course of the market has been unstoppable and resilient, to say the least. The Nifty recently breached the 18,000 mark- that is almost a whopping 250% return in 1.5 years! 

Those who held tight to Nifty even in its days of struggle in 2020 and those who showed patience and bought the dips made enormous profits.

Should We Hold a Loss-making Stock? 

Ideally, one should cut loss-making stocks and rebalance a portfolio once in a while, but that doesn’t translate into selling wildly and panicking from small corrections. The market has responded to staggering highs with small corrections several times.

When dealing with loss-making stocks, follow the following three rules to find out when to sell stocks yielding negative returns-

  1. Sell the stock if the losses are beyond the risk-to-reward ratio you planned for that particular stock
  2. Sell the stock if it falls below your stop loss or strong support zones. 
  3. Don’t hold a stock for tax-loss harvesting because, in the quest of saving a few bucks in taxes, you’ll end up losing too much on the stock. 

What is the Ideal Holding Period? 

If you are not running short on funds, staying invested until your goals are realized may be the best way forward. Some investors advocate staying invested for years. 

Thus investing strategies vary for each individual and depend on their risk appetite. It should be aligned with investment goals rather than what others are saying.

You may also want to know

1.

How Much Money Can You Make in Trading Stocks

2.

How to do Valuation Analysis of a Company

3.

How to Read Stock Charts

4.

How to Read Candlestick Charts for Intraday Trading

5.

How to Make Money in Stock Market

Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.

To read the RA disclaimer, please click here
Research Analyst - Aakash Baid

Check More Stocks

Share Name

Annual Revenue (in Cr)

2019

2020

2021

2022

2023

Uttam Sugar Shares

474

530

462

606

520

PFS Shares

194

200

193

202

204

Cupid Shares

43.49

35.2

36.45

40.78

65.88

Airan Shares

27.34

26.06

24.78

27.25

26.22

Kothari Sugar Shares

130

213

165

117

136

Alembic Ltd Shares

33.05

39.16

39.47

80.15

41.55

Advik Capital Shares

229

153

163

210

323

Manali Petro Shares

244

339

308

279

212

BGR Energy Shares

258

132

146

236

473

Man Industries Shares

672

609

494

1039

847

Disclaimer

The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. Groww Invest Tech Pvt. Ltd. (Formerly known as Nextbillion Technology Pvt. Ltd) Ltd. do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
Do you like this edition?
LEAVE A FEEDBACK
ⓒ 2016-2024 Groww. All rights reserved, Built with in India
MOST POPULAR ON GROWWVERSION - 5.0.0
STOCK MARKET INDICES:  S&P BSE SENSEX |  S&P BSE 100 |  NIFTY 100 |  NIFTY 50 |  NIFTY MIDCAP 100 |  NIFTY BANK |  NIFTY NEXT 50
MUTUAL FUNDS COMPANIES:  GROWWMF |  SBI |  AXIS |  HDFC |  UTI |  NIPPON INDIA |  ICICI PRUDENTIAL |  TATA |  KOTAK |  DSP |  CANARA ROBECO |  SUNDARAM |  MIRAE ASSET |  IDFC |  FRANKLIN TEMPLETON |  PPFAS |  MOTILAL OSWAL |  INVESCO |  EDELWEISS |  ADITYA BIRLA SUN LIFE |  LIC |  HSBC |  NAVI |  QUANTUM |  UNION |  ITI |  MAHINDRA MANULIFE |  360 ONE |  BOI |  TAURUS |  JM FINANCIAL |  PGIM |  SHRIRAM |  BARODA BNP PARIBAS |  QUANT |  WHITEOAK CAPITAL |  TRUST |  SAMCO |  NJ