Buying a stock and holding it for ten years is that safe? In any case, it is a long-term approach. If you get the right shares, it definitely has some potential. But today it’s not about the opportunities and the best case, but rather about the risk.
So today, let’s look at statistics and consider other factors. Buying a stock and holding it for 10 years may be safer than you think. But there can be no guarantee.
Buy shares and hold them for ten years: the statistics
As a foolish investor, you are certainly familiar with the evaluation of the development of broad markets. In the S&P 500, for example, there has never been a negative return after a holding period of 20 years. Despite crashes, economic crises and other things. Only ten years is half of it.
What does the past say about this? The probability of a positive return for the S&P 500 would be 88%. Again, that would be pretty safe. But security looks different. However, 12% risk of loss needs further context. For example, that a single share is not the broad market. This value is therefore anything but representative. But also that the past does not always have to be an indicator for the future.
Ultimately, though, it’s a cautionary tale that there’s a solid probability of a positive return on many stocks you want to buy and hold for at least 10 years. But no security. In the case of defensive dividend stocks, quality stocks and those with a functioning business model, the probability increases accordingly. Whereas with growth stocks, a lot is possible.
There is no security
Nevertheless, we have to say that we cannot speak of security over a period of ten years and buying a single share or shares in general. There are no guarantees, past or future. Just a scenario that reveals possibilities.
It would be crucial for me, for example, to focus on diversification in order to minimize the individual risk. As well as the fact that, ideally, you have longer periods of time at your disposal. Both increase security and minimize the risk side. That is the only thing that we can really take away from this topic in a very valid way.