Everyone desires to build wealth, and the most lucrative option everyone tends to consider is the stock market. This is because of the profit-making potential and trust that these markets will always perform well.
However, people downplay that these decisions come with certain risks, which can either increase or wipe out your investments. To be precise, the average S&P investor loses about 3.5% of their investment annually due to overholding stocks or not worrying about indicators that show it’s time to sell.
Remember, markets are always volatile, affecting you based on how long you hold the stock. Someone may decide to have a stock portfolio for over a decade, while some people, especially traders, are more likely to buy and sell within a week or even 24 hours. It all depends on who holds the stock, why, and what they know about it.
Therefore, there is no stable and well-defined duration. However, if you pay attention to certain factors, you can decide when to dump the stocks for a profit. So, to answer the question, this article explores some tips to help you navigate the dilemma.
1. Understand Short vs Long-term Investments
Everyone is obsessed with expert traders’ behavior of always holding onto stock and suddenly dropping everything at a profit or when they suspect a market change. This is always far from reality. You can always hold an asset long-term or short-term based on your interests and investment goals. If the objective is to profit more, you can hold for 24 hours or a week and then sell.
However, you can hold them for a long time, even a year or more. This is mainly based on the stock stability and growth projections over time. For example, some stocks consistently grow monthly; hence, the longer you hold them, the better for you.
Remember, both long-term and short-term could be a profit-making strategy. All that matters is your durational desire for profits.
Before making such decisions, visit stock trading sites to understand the performance of different assets and see their growth projections to help you decide whether you need short or longer withholding. You can monitor the daily price changes and percentages to help you project the changes and make decisions about long or short-term investments. The decision should also be based on factors like volatility.
2. Know Your Risk Appetite
Holding too much stock for a while can be risky, especially in volatile markets susceptible to natural conditions and factors like politics. Today, political changes are one factor that easily shapes the global markets, so you should be careful about your risk appetite.
Should you choose to hold them longer, make sure you diversify into more options and have more information that they will keep growing in value.
Otherwise, you should focus on manageable risks through short-duration trades of up to a month. If the risks are lower and there is a positive growth trend, then it is best to be patient and wait for more returns in two or more years.
3. Explore Your Investment Goals
If you want to use the investment for retirement benefits, consider holding it longer. Also, do not buy risky ones; buy stable ones from big companies like Alphabet, which are guaranteed to grow no matter what happens.
If you love market hype and speculation or want to make daily or monthly profit/income, youthfully buy high-risk stocks and hold them for a short while. When you notice a significant market change, it’s time to dump it as more people gain interest in it.
4. Understand the Prevailing Market Conditions
Before you buy stocks, remember that they are the most volatile assets anyone can hold. A sudden change in major economies and developing countries could influence any stock in any country, hence the need for caution.
Any speculation or news, especially those related to politics, trade, and natural disasters, could signal whether you want to sell or buy. It does not matter what your investment goals are; ensure you sell anytime you get news before it impacts the stock price.
Pay attention to the company’s news and financial statements, especially the quarterly statements and industry publications, to know what may happen to the stocks.
Occasionally, you should follow the market and not be left behind. If the market is selling, so should you. However, it can also be a time to buy cheaply, especially if you trust an industrial chance that will favor the stock positively in the future. Then, wait as things change, especially during the hype, and then sell.
5. Consider The Type of Stock
Every stock has its optimal holding period. Some, like blue-chip stocks, require patience, so you should hold them long-term. They are also guaranteed to pay consistent dividends if you select those from established companies like Apple.
The second type is those with great potential, especially those likely to grow due to industry changes directly associated with political decisions and goals like providing affordable housing. You can hold them for up to a year or four, depending on the political terms. You should sell them before the end of the political term to make profits.
The third option is the cyclical stocks, which are very volatile. You should have them in your portfolio for a maximum of a month or three before selling them.
Bottomline
Instead of worrying about how long you need to retain the stock, pay attention to the indicators that it’s time to sell. There is no need to hold longer if you can profit today or avoid a loss due to market factors. Just ensure you consider your goals and why you’re buying the stock.
Also, consider its volatility and other market, geographical, and political factors impacting the prices.
Finally, pay attention to the type of stock you are holding.
