One of the questions I am often asked by prospective investors is how long they should hold onto a stock, or stocks.
If you plan on investing money in the stock market, you have to be willing to commit capital for a minimum of three to five years.
That means any money you invest today should be considered untouchable for at least three to five years. Preferably five.
If you want to know why, take a look at the last 90 days.
Over the past three months, my personal account has gone down 42%. It took me years to earn what I’ve given back these last 90 days.
However, that’s the stock market.
And that’s why you have to leave your money alone for a considerable amount of time, and let time do its thing.
Fidelity Investments did a study a few years ago in which they discovered that the performance of actively traded accounts underperformed accounts with little or no activity. Some of these inactive accounts were held by people that had passed away!
Think about what this means! The stocks were held for years and years, throughout market fluctuation after market fluctuation. And these accounts ended up outperforming those in which the accountholders kept on trading.
That is a testament to letting your money work over time!
So to reiterate:
Invest with the intent not to touch the money for three to five years, preferably five. Buy good companies, leave your holdings alone, and let time take its course!
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