How finance folk use it
The holding period refers to the time you’re invested in a time deposit, unit investment trust fund (UITF), or mutual fund. For bonds, it is called “tenors,” which also describes how long you have to wait until the bond matures.
The holding period can be short-term (a few days to a few months), medium-term (a few months to three years), or long-term (three years or more).
It is best for you to not withdraw your investment during the holding period. Also, every investment has at least two holding periods: the minimum and the recommended.
If you withdraw your investment before the minimum holding period, you have to pay an early closure fee (for time deposits) or early redemption charge/fee (for UITFs and mutual funds).
The recommended holding period is the time you are expected to hold on to the investment so it has time to reach its growth potential.
Is it good or bad?
Good. The holding period lets you know how long you have to wait for your investment to grow.
What it means for you
The holding period serves as a guide so you can stick to your goals. It does this by discouraging you from withdrawing your investment. This is useful for when you want to withdraw because you want to spend or if you’re panicking and want to pull out.
So, whenever you’re looking for an investment, make sure to know the holding period and gauge if you can stick to it.
