Holding Period

My holding period is 108 days on average. I win just under half the time and when I do I make three times as much as when I lose (see here). Why would I want to increase my holding period? Ideally, I want to reduce my holding period, increase my win percentage and increase the ratio of my average win to my average loss. Clearly, there is some interdependence between these measures, but assuming no deterioration in the latter two reducing holding period would improve my overall returns. The consensus view seems to be the opposite, namely that a long holding period is always better. I believe a key advantage of retail investors over funds is our ability to easily move in and out of positions. Why give this up? I am not talking about overtrading and decisions should always be backed by sound reasoning. There are tax benefits of holding for longer, but it is debatable whether these outweigh the advantage of agility. Ultimately, I think it comes down to individual psychology. I change my mind regularly (you may call this fickleness, I prefer the term mental flexibility) and so a short holding period suits me. I also prefer buying cheap stocks with favourable outlooks rather than making heroic assumptions about the long-term future (although I do both).

Comments

  1. Interesting perspective, I have worked hard to increase my holding period and decrease activity as I percieved it as a propensity to be over active just for the sake of doing something in my early days!

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    1. I'm not immune to that kind of behaviour either Galumay and good on ya for overcoming it. I try to only trade when it improves the portfolio, but it's easy to come up with excuses and I'm sure that often I'm just tricking myself.

      By the way I saw your tweet about Sal. I feel for you and glad you caught it early.

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