Mark Hulbert reports (bypass registration here) on MarketWatch.com that the average holding period for a NYSE-listed stock is 11 months, which is quite shocking. By trading too often, investors are not allowing compounding to work its magic. Transaction costs and taxes eat into returns and it is a wonder anybody makes money in the market with such short attention spans.
I am happy to report that in five years of investing in the markets, I have mostly bought stocks and seldom sold them. I sincerely believe that it is easy to lose money quickly in the market but getting rich is a slow process that takes decades, not months.
Note: I am working on a post on “Best Deals in Canada”. I am planning to mention President’s Choice Checking Accounts, Virgin Mobile cell phone service etc. I would really appreciate any suggestions or comments.
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5 responses so far ↓
1 Alex Givant // Jul 15, 2005 at 1:49 pm
You may want to mention employee discount price in Ford, GM and Chrysler. It’s good till Aug 2, 2005, but I have gut feelings it’ll stay longer than that.
2 Real Returns // Jul 15, 2005 at 11:42 pm
The “average” holding period can be skewed by a few people (read, hedge funds, day traders) moving in and out of the stocks. I don’t put a lot of stock into these numbers.
3 Anonymous // Jul 16, 2005 at 6:44 am
I love President’s Choice - great service, hi rates, etc - I am sure I save a couple of hundred a year in paying no fees - but I save even more being a member of Costco
4 Arbee // Jul 17, 2005 at 12:11 am
Anon: I will mention Costco. I am a member and I love the store.
Alex: I am not sure these discounts will last.
Real Returns: True, the average is skewed by hedge funds, program traders etc. But the point is since so much money is short-term oriented, management will be pressured to cater to their interests. It is a bad deal for long-term investors.
5 Real Returns // Jul 17, 2005 at 5:06 pm
That’s why I love Vanguard. Vanguard just implemented some new trading restrictions to curtail short term trading. That is music to my ears.
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