Long-term stock holding may be losing effectiveness — MarketWatch

The strategy of buying shares in successful companies and holding them for a long time does not guarantee success, according to Adam Parker, founder of Trivariate Research. In his assessment, the share of stocks that outperform the S&P 500 index over the long term has declined.

Traditional approach

As MarketWatch reports, for many decades a common rule on Wall Street was to buy shares of winning companies and hold them indefinitely. However, Parker believes the time of this strategy may be coming to an end. His conclusion concerns the performance of individual stocks compared with the broad S&P 500 index over the long term.

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Gap between leaders and laggards

In Parker's view, the spread of short-term options and leveraged ETFs in the market has helped widen the gap between winners and laggards in the stock market. In the subheading of its article, MarketWatch notes that the shrinking share of stocks that outperform the index over time increases the need for active managers to be flexible.