A holding period is the duration of an investment by an investor. It begins with the purchase date by the investor and ends with the sale date. When an investor is engaged in a short transaction, the holding period begins with the date when the security is borrowed and ends with its return.
There are several reasons for tracking the holding period of an investment, which include the following:
- Ensuring that a sufficient period of time has passed (one year) to assign a lower capital gains tax rate to any gains
- Measuring the return on investment over time