Holding Power is the Key to better Returns

This is a post that I am only able to write after 10 years.

This is because it took me more than 10 years to collect this data, as it requires me to hold a stock for at least 10 years. 

First, a bit of background. 

In my readings on investment, I came across a chart that looks like the one below multiple times:

https://thesmartinvestor.com.sg/is-holding-stocks-for-the-long-run-worth-your-time/

Interesting finding from the article above: 

In a single day, your probability of winning in the stock market is roughly similar to a coin toss, about a 50-50 chance. 

Extend that out to one year, and your chances increase to over two-thirds probability. 

Stretch that to 10 years, and almost 90% of every 10-year period is positive. 

Do it for 20 years and more, it is 100% positive, and you never lose any money.

I was intrigued.

If I can make money by doing nothing, how good will that be?

I can free up more time for my work or pursue other things of interest. 

Hence, I calculated the returns of my stocks versus the holding period:

The longer the holding period, the better the returns.

Each dot represents 1 stock.

The blue dots are simple returns of the stock. The blue line is the trendline of the blue dots.

The red dots are simple returns of the stock with dividends and DRP(dividends reinvestment plan) included. The red line is the trendline of the red dots.

Without dividends and DRP considered, the correlation between returns and holding period is 0 (no correlation).

With dividends and DRP(dividends reinvestment plan) considered, the correlation between returns and holding period is 0.29 (weak correlation).

OK, I thought the correlation would be higher, but it is what it is. 

In case you are wondering which stock each point belongs to, here it is below.

The best and worst stocks.

The stocks in the top right (DBS, Sempcorp) are my best stocks with the highest returns (with a long holding period). 

The stocks in the bottom right (Keppel Reit, CDL Hospitality Trust) are my worst stocks with the lowest returns, even after a long holding period (more than 10 years).

The stocks on the left are my 'hits' (Boustead), for which I got a high return even with a low holding period.

Yes, I find that the longer I hold a stock, the higher the chance that I will not lose any money. Hence, now even with a loss-making stock, I won't sell. I simply wait until it recovers through sheer holding power. 

Next, I think it will be interesting to see a bar chart similar to the one above, where I calculate the percentage of stocks with positive returns given the holding period. 

But that will be for another article. Stay tuned!