Interest: What Is Holding Period Return?

Holding period return is the rate of return on an asset per number of months or years the investor sets for the holding period.

This rate of return will typically be short in nature for traders who are involved with shorter term investments, such as day traders using year-to-date holding period returns. A year-to-date return is a common holding period for all investors. It measures the rate of return from the beginning of the calendar year to the day of trading.

Investors who look at the long term, such as mutual fund companies or insurance carriers for annuities, will typically compare returns for longer holding periods. These long-term investors will look at 1-year, 3-year, 5-year, and 10-year returns to better gauge the investments for comparison. 

No matter what holding period one chooses to use, it is important to know that holding period returns are used for all time ranges--only, different types of investors will use different holding periods to measure their rates of return. With that said, someone should be able to categorize which time span he or she is using based on the type of investor he or she is.

 

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