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What is a Holding Period?

Holding period refers to the time during which an investor holds a given security.

How Does a Holding Period Work?

The holding period for a security is defined as the elapsed time between the initial date of purchase and the date on which the security was sold. A short-term holding period is defined as less than one year while a long-term holding period is defined as one year plus one day and beyond.

To illustrate, the holding period for a security purchased on January 1, 2009 and sold on June 30, 2009 would be six months (short-term), while the holding period for an item purchased on January 1, 2009 and sold on January 31, 2010 would be 13 months, or one year and one month (long-term).

Why Does a Holding Period Matter?

The duration of a holding period is important for the purpose of calculating capital gains, as gains on long-term holdings are taxed differently than gains on short-term holdings.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.