Bulkowski's Hold On!

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

This article discusses how long you need to hold onto a stock to make a profit, based on the performance of a market index.

To make money, how long should you hold onto a stock? I'll give you the probabilities in a moment, but here's how I did it. I downloaded the daily, weekly, and monthly price data from yahoo finance using the S&P 500 index and then went to work. The data ranges from January 3, 1950 to April 13, 2010. For the computation, I used overlapping periods. For one year, as an example, I determined whether price closed higher from April 1, 2010 to May 1, 2009. Then I used the next month, March 1, 2010 to April 1, 2009, and so on. I summed the number of up closes compared to the number of samples and found the percentage.

In other words, I counted the number of times price closed higher for each period. The table below shows what I found.

Period	Percentage Up Closes	Period	Percentage Up Closes
Daily	53%	5 Years	83%
Weekly	56%	6 Years	86%
Monthly	59%	7 Years	90%
1 Year	71%	8 Years	91%
2 Years	79%	9 Years	92%
3 Years	83%	10 Years	92%
4 Years	84%

For example, if you bought the S&P 500 index and sold it a day later, you would have a 53% chance of making money -- all else being equal. If you hold onto the index for a week, the probability of a gain rises to 56%. Hold for 5 years, and the probability rises to 83%.

If you are having problems making money in this market, then consider holding longer. Or just buy low and sell high.

-- Thomas Bulkowski

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Menu: a list of dishes the restaurant has just run out of.