How Long Should You Hold Onto A Stock?

How Long Should You Hold Onto A Stock?

It’s typically the ultimate question when you have a stock that is profitable.

It depends first on your intention, which should be pre-planned and thought out before even investing in a stock. And, there are the unforseeable events that might occur, a stock market crash, a correction or event a change in the sector in which the stock belongs.

First off, I would work on intention. Is the stock intended to be a day trade, a swing trade, position trade or long term investment?

Once you’ve decided on that, then it’ll be a lot easier to rationalize your investment.

But here’s the clencher… changes will happen that will affect the stock. But if you’ve decided to hold on for the long term, then it’s simple to not do anything and hold for the long run.

But other scenarios can occur. And a good example is TSLA, which once was at $900 a share, and fell to below $600 a share. That was a big drop, but the stock is rebounding recently, and I’m holding for the long run, anyway. So, long term hold, but… I took in a few profits by selling the stock in small increments, so I can get those profits. And I still have a substantial amount of shares now that the stock is rebounding.

Then there’s SHOP which I’ve been holding long since 2017 when I bought at around $85 a share. The stock is now up to +$1400 a share, so this is definitely a long term hold and I plan to hold this stock for more than 5 years, as analyst’s projected growth has been upgraded to $1900 a share.

If you’ve bought a substantial amount of shares and have seen a good profit gain, one strategy is always to take some profits off the top, and still retain that holding and take advantage of that percentage gain. You can always cost-average, buying more shares in the future when the stock drops. For even the most successful stocks will have 52 week highs and 52 week lows. Buy the dips or cost-average each quarter, or just whenever the stock drops.

It’s important to track sectors to determine the health and profitability of that sector. For example, pandemic stocks, or covid vaccination stocks, which have been showing much growth in 2020 and 2021.

For the most part, covid vaccination stocks like MRNA, BNTX and PFE have been doing well. And any stocks related to the pandemic, lockdowns and quarantines have doing well in 2020 and 2021, like AMZN, ZM, and TDOC. But it’s important to continue to track these sectors for changes and act accordingly.

Another area to watch closely are the microchip stocks, since there has been a microchip shortage, which has been affecting sectors like the automobile industry since the new vehicles are all computerized and contain microchips. Stocks like AMD and NVDA have been surging in 2021, but the scenario can change, but the demand for microchips could go on for several years as the demand is remedied by mass production and growth.

More later…

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randomguru

Portfolio Manager & Musician

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