When you build your investment portfolio you want to invest in different types of stocks. The duration for which you hold each investment will depend upon a number of factors. A core holding is one that you intend to hold for the long haul.
For example, there are some companies which have been around for a long time, are stable and can be counted on to grow, if slowly, for as long as you have them. Companies such as GE, Coca-Cola and Apple would be good choices for core holdings.
Another definition of a core holding can be an investment which is sufficiently broad so as not to be as prone to fluctuation. Total stock-market index funds which offer shares backed by a large number of holdings mimic the performance of broad market indexes. It is important that such large cap funds don’t just represent one or two aspects of the overall market, or they simply won’t work as core performers.
What one person may consider a core holding can dramatically differ from what another person views in that category. Even index funds which over the long term show a consistent gain of 5% or more may have years where they trail the behind the S&P 500.
Core holdings should play a part in every portfolio, although the percentage will differ greatly throughout the life of the average investor. Few core holdings are common in the early work years while an increased number of such stable investments are more common for those approaching their retirement years.
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