As long as markets have existed, investors have tried to maximize gains and minimize losses by timing the market.
Timing the market involves attempting to buy when prices are low but rising and sell when prices are high but falling. However, when it comes to stock market timing, you must be successful twice: Once when you buy and then again when you sell.
It’s hard enough to time things correctly on one end, let alone getting the timing right on both ends. Another consideration is that every time you trade, you likely incur brokerage fees and taxes, which quickly reduce your net returns on both the purchase and the sale.
Most investors should consider two important steps – a buy-and-hold approach and building a diversified portfolio that reflects their own investment risk tolerance and investment time horizon.
Instead of trying to time the market, consider spending time in the market. You may find that a passive investment strategy, such as buy-and-hold, can help you gain long-term returns.
The Long Game: Why I’m Holding My Stocks for Years (And Why You Should Too)
Hey there, fellow investors! Today I wanna talk about something that’s transformed my investment journey – holding stocks for the long term. If you’ve ever wondered “can I hold stocks for years?” the simple answer is: not only can you, but you probably should!
When I first started investing, I was obsessed with checking my portfolio daily and making frequent trades. Boy, was that exhausting (and expensive)! Now I’ve learned that patience isn’t just a virtue—it’s a legitimate investment strategy that historically outperforms short-term trading.
Let’s dive into why holding stocks for years might be one of the smartest financial moves you’ll ever make
The Power of Long-Term Stock Holding: By the Numbers
First off, what exactly counts as “long-term” in the investment world? Generally, holding investments for more than 12 months is considered a long-term investment strategy. This approach applies to various assets like stocks, bonds, ETFs, and mutual funds.
Looking at historical data the evidence is pretty compelling
- The S&P 500 returned a geometric average of 9.80% per year between 1928 and 2023
- During this same period, three-month Treasury bills returned only 3.30%
- 10-year Treasury notes returned 4.86%
- Gold returned 6.55%
Even more impressive is this fact: between 1974 and 2024, the S&P 500 experienced annual losses in only 13 years! That means the stock market generates positive returns much more often than negative ones.
The 6 Major Benefits of Holding Stocks for Years
1. Better Long-Term Returns
When we look at decades of asset class performance, stocks consistently outperform almost all other investments. This is especially true when you’re willing to ride out short-term market fluctuations.
If you’re wondering which stocks perform best over the long haul:
- Index funds that track broad market indexes
- Dividend-paying stocks (especially when you reinvest those dividends)
- High-growth companies with strong earnings growth
2. You Can Ride Out Market Volatility
Stock markets are rollercoasters – that’s just facts. It’s not unusual for stocks to drop 10% to 20% (or even more) in short periods. But here’s the kicker: looking back since the 1920s, investors have rarely lost money in the S&P 500 over any 20-year period.
Even considering major market catastrophes like:
- The Great Depression
- Black Monday
- The tech bubble burst
- The 2008 financial crisis
If you had invested in the S&P 500 and held uninterrupted for 20 years, you would have experienced gains in almost every scenario. That’s pretty mind-blowing!
3. You’ll Make Less Emotional (and More Profitable) Decisions
Let’s be honest—we humans are emotional creatures. One of the biggest investor flaws is letting emotions drive decisions. Many claim to be long-term investors until the market starts falling, then panic and withdraw money to avoid losses.
According to Dalbar’s Quantitative Analysis of Investor Behavior study, during the 30-year period ending December 31, 2022:
- The S&P 500 had an average annualized return of 9.65%
- The average equity fund investor earned just 6.81%
That’s a huge difference! Why does this happen? Two big reasons:
- Fear of regret – We worry we’ll regret holding stocks during downturns, so we sell at the worst possible times
- Pessimism during change – When markets get rocky, optimism vanishes and people assume things will only get worse
By committing to holding stocks for years, you’re essentially protecting yourself from… yourself!
4. You’ll Pay Lower Capital Gains Taxes
This benefit is HUGE and often overlooked. When you sell a stock after holding it for less than a year, any profits are taxed as short-term capital gains—at the same rate as your ordinary income (up to 37%!).
But hold those same stocks for more than a year, and you’ll pay long-term capital gains tax rates of just:
- 0% (for lower tax brackets)
- 15% (for most investors)
- 20% (maximum rate for high-income earners)
That tax difference alone can significantly impact your wealth building over time.
5. Long-Term Holding Is More Cost-Effective
Every time you trade stocks, you might be paying:
- Transaction fees
- Commission or markups
- Account maintenance charges
- Higher taxes (as mentioned above)
All these costs add up and eat into your returns. While many online brokerages now offer fee-free transactions, there’s still the value of your time spent on trades to consider.
Plus, frequent trading often leads to underperformance compared to simple buy-and-hold strategies. When I stopped trying to time the market and just let my investments grow, my portfolio thanked me!
6. You’ll Benefit from Compounding (Especially with Dividend Stocks)
Dividend-paying stocks distribute a portion of corporate profits to shareholders, typically every quarter. When you reinvest these dividends instead of cashing them out, you harness the incredible power of compounding.
Compound interest is calculated on both your principal balance AND previously earned interest. Over time, this snowball effect can dramatically increase your investment returns.
I’ve personally seen my dividend reinvestment plan transform modest initial investments into substantial sums over 10+ years. The longer you hold, the more powerful compounding becomes!
Best Types of Stocks to Hold Long-Term
Not all stocks are created equal when it comes to long-term holding. Here are some categories that tend to perform well over extended periods:
Index Funds
These ETFs track specific market indexes like the S&P 500 or Russell 1000. They offer:
- Lower costs than actively managed funds
- Broad diversification
- Returns that mirror the overall market
- Less research needed (you’re buying the whole market)
Dividend-Paying Stocks
Companies with a history of paying steady or growing dividends can be excellent long-term holdings, especially when you reinvest those dividends to compound your returns.
Growth Stocks
These companies generate higher revenue at faster rates than their peers. While they come with higher risk, they also offer potential for substantial long-term returns.
Common Questions About Holding Stocks Long-Term
How long must I hold a stock for it to be considered “long-term”?
For tax purposes, you need to hold a stock for at least 12 months for it to qualify as a long-term investment.
Can I sell a stock right after buying it?
Technically yes, but there might be restrictions depending on your broker. Some require you to wait until the settlement date, while others limit the number of same-day transactions. Plus, short-term trading comes with higher tax consequences and potentially higher fees.
Will I miss opportunities by holding stocks for years?
You might miss some short-term trading opportunities, but historical evidence suggests long-term holders ultimately come out ahead. Remember that trying to time the market perfectly is nearly impossible, even for professionals.
My Personal Experience with Long-Term Stock Holding
When I first began investing, I was constantly checking stock prices and making frequent trades based on market news or “hot tips.” The result? High fees, stress, and underperformance.
Once I switched to a long-term strategy, everything changed. I’ve held some positions for over 10 years now, and those have become the stars of my portfolio. Not because I’m some investment genius, but because I gave solid companies time to grow and compound.
Sure, I’ve had to weather some scary market drops along the way. During the March 2020 COVID crash, I was tempted to sell everything. But I stuck with my long-term plan, and by early 2021, my portfolio had not only recovered but reached new highs.
Is Long-Term Stock Holding Right for You?
Long-term stock investing works best when:
- You don’t need the invested money for at least 5+ years
- You can emotionally handle market volatility
- You’re more interested in building wealth than in the excitement of trading
- You want to minimize taxes and trading costs
- You prefer a “set it and somewhat forget it” approach
If you’re saving for retirement or other far-off goals, long-term stock holding aligns perfectly with your timeframe.
How to Get Started with Long-Term Stock Investing
Ready to become a long-term investor? Here’s my simple approach:
- Determine your investment goals and time horizon
- Choose quality investments (index funds are perfect for beginners)
- Set up automatic investments if possible
- Reinvest all dividends
- Resist checking your portfolio too frequently (monthly or quarterly is plenty)
- Stay invested during market downturns
- Rebalance occasionally (once or twice a year)
Final Thoughts: Patience Pays Off
So, can you hold stocks for years? Absolutely! And the evidence strongly suggests you should.
The stock market rewards patience more than cleverness. By committing to long-term holding, you’ll likely achieve better returns, pay less in taxes and fees, make less emotional decisions, and benefit from the magic of compounding.
As the old Chinese proverb says, “The best time to plant a tree was 20 years ago. The second best time is now.” The same applies to long-term stock investing.
I’d love to hear your experiences with long-term investing! Have you held stocks for years? What were your results? Drop a comment below!
Until next time, happy (long-term) investing!
Investments can grow despite market fluctuations.
U.S. stock market volatility periodically causes even stalwart buy-and-hold investors to second guess their strategy. However, while past performance is not a guarantee of future returns, history shows that the market has always recovered from declines and provided patient investors with positive returns over time. In fact, over the past 35 years, the market has posted a positive annual return in nearly eight out of every 10 years.1
Passive investing: Strategies for buy-and-hold investors
The two primary buy-and-hold investing options are:
You invest a large chunk of money all at once. You might have a lump sum of cash from the sale of a family business, the sale of company stock, an inheritance or proceeds from an insurance policy claim, for example. The sooner you invest, the sooner you begin earning returns and start the process of accumulating compound returns.
With dollar cost averaging, you regularly invest a fixed dollar amount in a specific asset. It allows you to actively invest in the market even if you have only a small amount of money to put to work each month.
For example, consider a $300 monthly investment into an index fund that covers a broad range of stocks. When stock prices move higher, your $300 contribution will buy fewer shares. When values decline, your monthly contribution will purchase more shares. In this way, an investor avoids putting a large lump sum of money to work when an investment reaches peak value, and it can result in a lower average price per share, particularly through volatile market periods.