What is a Hold?
Hold is an analyst's recommendation to neither buy nor sell a security. A company with a hold recommendation generally is expected to perform with the market or at the same pace as comparable companies. This rating is better than sell but worse than buy, meaning that investors with existing long positions shouldn't sell but investors without a position shouldn't purchase either.
Understanding Hold Recommendations
A hold recommendation can be thought of as hold what you have and hold off buying more of that particular stock. A hold is one of the three basic investment recommendation given by financial institutions and professional financial analysts. All stocks either have a buy, sell or hold recommendation. Often, a single stock may have two or more conflicting recommendations given by different financial institutions. In these cases, it's important for investors to look at the advice provided and decide which is more accurate for their specific situations.
If an investor decides that a stock is a hold, she has two potential options. If the investor already owns shares of the stock, she should hold onto the equity and see how it performs over the short-, medium- and long-term. If an investor does not own any shares of the equity, she should wait to purchase until the future prospects become more clear.
Key Takeaways
- A hold recommendation means that the analyst making it doesn't see the stock in question outperforming or underperforming comparable stocks in the near term.
- A hold is sometimes considered damning with faint praise, but stocks that are hold can still perform long-term.
- A stock can have conflicting recommendations, so investors need to dig into the details before making a decision one way or another.
A Hold Versus a Buy-and-Hold Strategy
A hold is an analyst's call on a stock and distinct from the buy-and-hold strategy, where an equity security is purchased with the understanding that it will be held for the long term. The definition of long-term depends on the specific investor, but most people entering into a buy-and-hold strategy will own a stock for five years or more. This type of strategy forces investors to stick with investments through market retractions and recessions so they don't sell during a dip; instead, they ride out volatility and sell at a peak.
Benefits of Holding a Stock
When an investor holds onto a stock, she is effectively initiating a long position in an equity. Investors who hold a stock for a long period of time can benefit from quarterly dividends and potential price appreciation over time. Even if a stock is given a hold recommendation and remains flat, if it pays a dividend, the investor can still profit. A hold position is not a bad one, and even stocks that are labelled as a hold can appreciate in price over time. They are just not seen as likely to outperform other comparable stocks.
Risks of Holding
However, there are also risks of holding a stock. All long positions are susceptible to market volatility and potential price declines. Sometimes investors predict a microeconomic or macroeconomic downturn but hold onto a stock because it was recommended by a leading financial institution. If the price of the stock subsequently declines with the market, the investor loses money. That said, the paper losses in a broad market dip only matter if the investor needs the money in the near term. If, however, the fundamentals of a stock have degraded, then the investor must reassess whether to continue to hold or not.
FAQs
Hold is an analyst's recommendation to neither buy nor sell a security. A company with a hold recommendation generally is expected to perform with the market or at the same pace as comparable companies.
What does a hold mean for a stock? ›
A 'hold' is generally an experts suggestion or recommendation to not either sell or purchase securities. A firm making a recommendation to hold is usually anticipated to perform with the market or at a similar pace of peer companies. This rating is considered to be better than sell and not better than purchase.
Why would you recommend buy and hold? ›
The Buy and Hold strategy is preferred for its potential to yield significant long-term returns, lower transaction costs due to fewer trades, reduced tax liabilities on long-term capital gains, and the benefit of compound interest. It's also less time-consuming and requires less market expertise than active trading.
Why does my stock say on hold? ›
Generally speaking, a hold rating means the stock isn't going to overperform or underperform to an extent that makes it a must-buy or must-sell. If you already have a position in the stock, there's not much to gain from selling it.
How long should you typically hold a stock? ›
Though there is no ideal time for holding stock, you should stay invested for at least 1-1.5 years. If you see the stock price of your share booming, you will have the question of how long do you have to hold stock? Remember, if it is zooming today, what will be its price after ten years?
Do you get money from holding a stock? ›
The stock pays dividends. Not all stocks pay dividends, but many do. Dividends are payments made to shareholders out of the company's revenue, and they're typically paid quarterly.
Does hold really mean sell? ›
A “buy” rating means analysts like the stock and think it's worth purchasing because its value is likely to increase. A “hold” rating is neutral. It means analysts are unsure which way share prices will move, so they recommend that you neither buy nor sell. A “sell” rating means analysts expect share prices to fall.
What does a stock hold recommendation mean? ›
A hold recommendation means that the analyst making it doesn't see the stock in question outperforming or underperforming comparable stocks in the near term. A hold is sometimes considered damning with faint praise, but stocks that are hold can still perform long-term.
Is it better to hold or sell stock? ›
It depends. If a stock price plunges because of a significant and long-term change in the company's outlook, that's a good reason to sell. Virtually all stocks, even the bluest of the blue chips, experience temporary setbacks and then move back upwards. Averaging down in such cases is a strategy to consider.
How long to hold stock to avoid tax? ›
Generally, any profit you make on the sale of an asset is taxable at either 0%, 15% or 20% if you held the shares for more than a year, or at your ordinary tax rate if you held the shares for a year or less. Any dividends you receive from a stock are also usually taxable.
Long-term stock investments tend to outperform shorter-term trades by investors attempting to time the market. Emotional trading tends to hamper investor returns. The S&P 500 posted positive returns for investors over most 20-year time periods.
Why would a company hold stock? ›
1. The main purpose of holding inventory is to avoid stock-out cost. All the firms must forecast the demand of their product and keep the inventory of raw materials, Work in Progress Inventory, finished goods and consumables so that no customer is sent back empty handed.
Are stock halts good or bad? ›
However, stock halts are actually used to protect investors and level the playing field between investors who are informed and reactive, and those who are simply not up to date on the news. The advantages of temporarily halting trading include: Allowing all market participants to be informed about any news.
Can I sell a stock and buy it back the same day? ›
Absolutely, you can buy and sell stocks within the same trading day. This dynamic strategy, known as day trading, is an integral part of the financial landscape and serves as the lifeblood for many traders.
What is a good amount of stocks to hold? ›
Understanding the Ideal Number of Stocks to Own
The more equities you hold in your portfolio, the lower your unsystematic risk exposure. A portfolio of 10 or more stocks, particularly across various sectors or industries, is much less risky than a portfolio of only two stocks.
What is the 10 am rule in stock trading? ›
Traders that follow the 10 a.m. rule think a stock's price trajectory is relatively set for the day by the end of that half-hour. For example, if a stock closed at $40 the previous day, opened at $42 the next, and reached $43 by 10 a.m., this would indicate that the stock is likely to remain above $42 by market close.
What happens if you hold a stock? ›
More Cost-Effective. One of the main benefits of a long-term investment approach is money. Keeping your stocks in your portfolio longer is more cost-effective than regular buying and selling because the longer you hold your investments, the fewer fees you have to pay.
Is buying hold a good investment? ›
Buy and hold is a long-term passive strategy where investors keep a relatively stable portfolio over time, regardless of short-term fluctuations. Buy and hold investors tend to outperform active management, on average, over longer time horizons and after fees, and they can typically defer capital gains taxes.
What is the difference between hold and sell? ›
Sell: Also known as strong sell, it's a recommendation to sell a security or to liquidate an asset. Hold: In general terms, a company with a hold recommendation is expected to perform at the same pace as comparable companies or in line with the market.
