Holding Period

DEFINITION of 'Holding Period'

The real or expected period of time during which an investment is attributable to a particular investor. In a long position, holding period refers to the time between an asset's purchase and its sale. In a short sale, the holding period is the time between when a short seller initially borrows an asset from a brokerage, and when he or she sells it back - in other words, the length of time for which the short position is held.

BREAKING DOWN 'Holding Period'

An investment's holding period is used for a number of different functions, including evaluating an investment's performance, calculating loss or gain from the investment and determining whether an investment is worthwhile. The holding period of an investment is also used to determine how the capital gain or loss should be taxed because long-term investments tend to be taxed at a lower rate than short-term investments.

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    The holding period on a stock dividend typically begins the day after it is purchased. Understanding the holding period is ... Read Full Answer >>
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