A core holding company is a long-term investment that forms the foundation of an investment portfolio, providing stability and direction. The length of time required to be considered a core holding varies, but it is generally a consistently profitable investment that can lead to financial stability.
A core holding company is a type of investment purchased with the express intention of remaining a part of the investment portfolio for an extremely long time, if not permanently. The nature of this long-term holding is generally considered to be both consistently profitable and substantial enough to form the foundation or core of the portfolio. A core holding can also form the basis for the investment business if a particular fund, as well as provide the foundation for a portfolio.
In many respects, a core holding company is the anchor that provides a sense of stability and direction to funds and portfolios. The type of investment, such as the stock of a highly regarded company, is usually a clue to the types of investment opportunities the investor chooses to pursue. Often, other more transitory investments will be possible due to the stability of the principal holding, as the holding represents at least one investment that will work consistently, even if other investments falter.
There is some disagreement about exactly how long a core holding needs to remain part of the portfolio to truly be considered a fundamental or core investment. Some analysts indicate that if the particular stock or other holding has been in the investor’s possession for at least ten years, the holding may be considered a core holding. Others indicate that major holdings must be held for twenty or more years before achieving that status.
Still others believe that the determining factor is not the current duration of the holding in the portfolio, but the intent of the investor. In other words, if the investor buys ten thousand shares of an established company with the intention of holding that stock for the next couple of decades, the investment can rightfully be viewed as a core holding. The status would only change if circumstances made it absolutely necessary for the investor to part ways with the shares.
Most investors will have at least one principal holding within their investment portfolio. Often, when and as far as possible, further actions are added to this participation. This incremental accumulation of shares over time can ultimately lead to great financial stability, assuming the selected major holding performs well over the long term.
Smart Asset.
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