March 1 (Reuters) – “Don’t just do something, stand
there!” might just be the best least-followed advice in
If there is one statistic that is, if anything, more
depressing than the last empty decade of equity returns it is
the fall and fall of average stock holding periods.
While the average holding period of a NYSE-traded stock was
10 years in the late 1930s the trend since 1995 has been down
and down, driven by ever more frenetic trading. By 2010 the
length of time the average share is held is down to a mere six
months, according to NYSE data, a real testament to the eternal
triumph of hope over experience.
To be sure, the rise of high frequency trading has
played a role in driving down average holding time, but others
have become more active traders too. Estimates vary, but the
average domestic equity actively-managed mutual fund in the U.S.
has an annual turnover rate of between 89 and 130 percent.
This may be great for the brokerage and mutual fund
industries, but for investors it is just about the opposite of
what should be happening.