How long is the holding period?

Holding period?

• How do you determine the holding period of the share to correct itself after calculated it to be under- or over-valuation?

• Answer:

  Great question. This is an investing strategy question, so the answer will depend upon each person's strategy. I'll give you mine: I try to wait at least a year or two, although if the stock breaks out sooner, and I think it is no longer overvalued, then I will sell earlier. Advantages to waiting - 1. Gains are taxed as long-term, and therefore the tax is lower. 2. You can forestall having to pay the tax for longer periods of time. Warren Buffett is a HUGE advocate of this line of thought. He points out that if you can go 20 or 30 years without selling a stock, then you don't have to pay taxes on the gains for those 20 or 30 years, and the money you would have had to pay to Uncle Sam keeps making more money for you. I've sold stocks after 2 months that I intended to hold for years. I've also held a stock for 2-3 years, and finally sold at a decent profit. Right now, I have ORA, which I bought at 16, and even though it is up at 38 or 40 these days, I'm still planning to hold it for the long term. Jason