Holding Period

What is a 'Holding Period'

A holding period is 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.

RELATED TERMS
  1. Base Period

    A particular time period for which data is gathered and used ...
  2. Short Term

    1. In general, holding an asset for short period of time. 2. ...
  3. Long Term

    Holding an asset for an extended period of time. Depending on ...
  4. Reference Base Period

    A year in which the Consumer Price Index is equal to 100, a reference ...
  5. Short Selling

    Short selling is the sale of a security that is not owned by ...
  6. Short Covering

    Buying back borrowed securities in order to close an open short ...
Related Articles
  1. Active Trading Fundamentals

    Guide to Short Selling

    Want to profit on declining stocks? This trading strategy does just that.
  2. Active Trading Fundamentals

    Short Selling Risk Can Be Similar To Buying Long

    If more people understood short selling, it would invoke less fear, which could lead to a more balanced market.
  3. Active Trading Fundamentals

    Short Selling: What Is Short Selling?

    Investopedia Explains: The fundamentals of short selling and the difference between going long or short on an investment.
  4. Investing Basics

    Why You Should Never Short a Stock

    Short selling a stock means you are betting on the stock decreasing in price. Before taking on this investment, you should fully understand the risks
  5. Trading Strategies

    Why Short Sales Are Not For Sissies

    Short selling has a number of risks that make it highly unsuitable for the novice investor.
  6. Fundamental Analysis

    Short Sales For Market Downturns

    This strategy can help in market downturns, but it's not for inexperienced traders.
  7. Investing

    Understanding Capital Gains

    Capital gain refers to the increase in value of a capital asset or an investment security upon sale. In other words, if you buy company stock, real estate or fine art and then sell it for more ...
  8. Active Trading Fundamentals

    Short Selling: Why Short?

    Generally, the two main reasons to short are to either speculate or to hedge. When you speculate, you are watching for fluctuations in the market in order to quickly make a big profit off of ...
  9. Active Trading Fundamentals

    Short Selling: Conclusion

    Short selling is another technique you can add to your trading toolbox. That is, if it fits with your risk tolerance and investing style. Short selling provides a sizable opportunity with a hefty ...
  10. Term

    The Difference Between a Long and Short Position

    Stocks are owned in a long position and owed in a short position.
RELATED FAQS
  1. How does holding period return yield differ between short and long positions in the ...

    Learn how holding period return yields differ from short and long positions due to a number of factors and shorting comes ... Read Answer >>
  2. When does the holding period on a stock dividend start?

    Understand the difference between qualified and unqualified stock dividends, and when the holding period for qualified dividends ... Read Answer >>
  3. When short selling, how long should you hold on to a short?

    Explore the reasons for short selling and the various factors that influence how long an investor may wish to maintain a ... Read Answer >>
  4. Over what period should I use dollar cost averaging?

    Learn why dollar cost averaging should be implemented over a period of time that is 12 months or less in order to avoid missing ... Read Answer >>
  5. Please explain what a short seller is on the hook for when he or she shorts a stock ...

    Short selling is hard enough to get your head around without getting into all the particulars. If you have a basic understanding ... Read Answer >>
  6. What are some of the limitations of only looking at the rate of return for an investment?

    Learn why only reviewing the rate of return for an investment poses a risk to the investor and what additional factors should ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center