Hey Mate,

Not sure I agree with this one, I don't think time is any advantage at all really.

After all time is fixed and the same for everyone, professionals have the option to be in the 5 year section but choose not to be.

The tweeter says hanging out in the green zone gives you the best chance of success... well yes if that is defined by the probably you make money on your initial outlay. But if you double your money and it takes 10 years then It's highly likely you have underperformed.

There are many compelling cases for retail investors to buy and hold, such as lack of time, resources, expertise etc, but I think as your skills advance you want to start upping your portfolio turnover to be in sync with that. The goal after all is not to have the highest probability of success like the chart highlights but to compound your portfolio at the highest rate net of taxes.

Our greatest advantage over the professionals usually is being more nimble and the option to buy less liquid names.

I hear you @ArrowTrades but my perspective is that most of the "pros" only choose to focus on the nearer term due to perverse incentive structures, such as the so-called institutional imperative. And the evidence shows that there tends to be a strong relationship between fund manager average holding periods and performance.

Joe Magyer points this out in this recent podcast as summarised by our own @CanadianAussie

I certainly agree that time alone is a poor edge if your stock selection is poor. In fact, probably a big negative! So what you buy matters a hell of a lot.

And definitely agree that lower liquidity stocks offer a big advantage too.

Either way, each to their own. What matters is that we all follow an approach that best suits our personality, temperament and strengths. Definitely more than one way to skin a cat in this game.

I agree @Strawman turnover correlates with worse performance. Those that trade too often, usually getting nervous, jump at shadows etc, which leads to poor performance along with a massive transaction and tax drag. So I think the edge is not actually time, but rather patience/discipline.

As you say at the end of the day it matters what you buy, So poor picks will do poorly on any time frame. But if you can get to the point where you are making good decisions on a regular basis, that's when gradually increasing turnover makes sense.

I believe most people should default to low turnover especially to begin with, but there are studies that suggest that it is easier for intelligent decision makers to forecast short term events, as there is less scope for unseen events as uncertainty grows as a function of time (Take weather forecasting for e:g)

For a good stock picker, their best new idea will likely have a better return profile than the name they have happily held for 5 years.

Of course that is gross. It is more nuanced when you factor in the costs and tax consequence. That can often lead to sticking with the stock held 5 years being the best decision. After all net returns after tax is what matters.

Like most things in investing, the best balance is tricky to find and different for everyone.