How long should you be holding your shares?

Investing can be like swiping in a dating app: making choices quickly and then rejecting them again. When you change partners frequently, though, building something lasting is rare. The same applies to your portfolio. So, how long should you hold an investment? And why is patience still the best strategy?

The numbers are clear. Just look at the New York Stock Exchange. In 1975, investors held onto shares for an average of 8.7 years. In the 1980s, that duration started to drop and by 1995 or so, it was already close to two years. By 2025, the average holding period was barely six months (source).

Why is this? First, trading has become very cheap and easy to do. In the past, you had to pay substantial fees per transaction and call your bank to place any orders. These days a tap on your phone is enough to buy or sell, often at minimal cost. Secondly, professional players and algorithms now dominate the market. Scalpers may only keep shares for fractions of a second before selling them on. This pushes the average down sharply. And thirdly, there is a constant flow of news, prices and opinions. Our brains are always on the alert, and an alert brain wants to be doing something.

Incidentally, it’s not just the private individuals who have become faster to move on. Professional asset managers, too, are more likely to take a tactical approach to managing their portfolios. Technological disruptions and geopolitical tensions are creating market trends that are shorter and more extreme. This has caused an increase in portfolio turnover across the board (source).

Why your brain is conditioned to trade

Investing is 10% calculation and 90% controlling your own impulses. Behavioural economists have discovered that we feel losses about twice as hard as we do profit. Did your share's price fall by 10%? That hurts more than a 10% rise would. As a result, we often sell in a panic when the market falls. At the worst times, too.

There is another factor at work here as well: the so-called disposition effect. Investors tend to sell winners too early in order to secure the profit. At the same time, they will hold onto losers far too long in hope of recovery. This can mean they are making poor choices twice over. They are pulling out the flowers and watering the weeds.

The megaphone of social media is also working against us. Every day brings new goals, stories of success and predictions of doom. When everyone else seems to be striking it rich, you feel FOMO, fear of missing out. That fear pushes you towards action, even when doing nothing would have been the better choice. Economist and Nobel Prize winner Paul Samuelson once summed it up as follows: Successful investing should be as exciting as watching paint dry.

Not making any moves can be doubly difficult. Leaving a winner to grow feels like gambling with the money you’ve won. Selling off a loser means admitting you were wrong. Both of these feelings are very human. That doesn’t make them good investment strategies.

Paying the price for overtrading

While trading constantly feels productive, the outcome can be disappointing. American researchers analysed securities accounts for 66,465 households. Their conclusions were revealing. The most active traders earned an annual return of 11.4%. This would not be bad at all – if the overall market return hadn’t been 17.9% during the period observed for the study (source).

What caused that difference? Every transaction cost money on account of spreads, taxes, etc. Each one nibbles away at your return. You also run the risk of missing out on the very best trading days. Those can make a big difference. For example, anyone who invested USD 10,000 in the S&P 500 at the beginning of 2005 reaped strong returns. After twenty years, that USD 10,000 had grown to USD 71,750. If you missed out on ten crucial days, however, you would have been left with a comparatively paltry USD 32,871(source).And here’s the thing: Seven of those ten fantastic days fell right after the worst ones. By selling in a panic, you are almost guaranteed to miss the recovery.

For Belgian investors, there’s another factor that must be taken into account: taxes. In Belgium, traders pay tax on stock exchange transactions (TOB) for every buy and sell order they make. Anyone who keeps changing the focus of their portfolio has to pay this fee every single time. And then there’s the spread, the difference between purchase and sale price. The more frequently you trade, the more these seemingly minor expenses add up. Individually, they barely register. Added up over the years, your return suffers.

The difference between investing and gambling

The line between investing and gambling has also blurred in recent years. Many trading apps flash and pulse like slot machines. Platforms such as Polymarket and Kalshi will let you bet on almost anything. Gamblers are eternal optimists. Investors own. A share is a piece of a company that creates value; products, services, profit, dividends. That value creation accumulates year after year. Placing a bet does not create anything at all.

Warren Buffett once summed up the difference in a single line. Our favourite holding period is forever. Superinvestor Warren Buffett did not become rich by betting on prices. He built his wealth by owning companies and having them make a profit for decades. Buy-and-hold: systematically building up shares, regardless of what prices are doing over the short term.

How long should you hold for?

There is no magic number. History does offer a clear guiding principle: the longer, the better. Since 1950, annual yields on US equities have fluctuated between +47% and -39%. But over periods of twenty years, a diversified portfolio’s return ended in the green every time(source). Time smooths out the ups and downs.

In practice, there are three useful horizons. If you are likely to need the money in the next few years, the stock market may not be the best place to keep it. For example, you may be planning a kitchen renovation or a child may be starting university soon. If you have five or ten years to reach your goal, it is fine to diversify your investments. Do be sure to include less volatile assets as a buffer. When it comes to your retirement or other faraway goals, aim for ten years or more. The farther away your horizon, the greater the likelihood of any dips levelling out.

Does that mean you should never sell? Not at all. There can be good reasons to rid yourself of an investment. Your horizon is approaching and you are less comfortable with risk. A company’s stability has decreased in fundamental ways. Or a position has grown so fast that it is dominating your portfolio. Rebalancing is a sound approach. Be aware of the distinction, though. These are decisions made according to a plan, not because of a red screen or an Instagram tip.

Boring investments are best

The best investment strategy is perhaps to be willing to be boring. Spread your investments across regions, sectors and asset classes. You can also invest at regular intervals, a fixed amount each month for example. That way, you will automatically buy more when prices are low. Don’t compulsively check your portfolio every day; once a quarter is plenty. Most importantly: make a plan and stick to it, particularly when the markets aren’t going your way. To once again quote Warren Buffett, The stock market is a device for transferring money from the impatient to the patient.

Are you itching to sell? If so, ask yourself three questions first. One: Have the company and the market in which it operates changed in any fundamental ways, or is it only the price that has changed? Two: Will I be needing this money in the next five years? Three: Would I buy this investment again today at this price? Only consider selling if all the answers are pointing in the same direction. In all other cases, the best transaction is usually none at all.

Before investing, be sure to read the key characteristics and risks of financial instruments and the KID (key information document) for the relevant product.

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