There is a troubling trend among U.S. investors, and it's causing them to miss out on millions of dollars of potential profits.
In the past 50 years, the average holding period for stocks has dwindled from eight years to just eight months.
There's no doubt that lower average has been affected by the rise of computer-based high-frequency trading.
But it has also been affected by the rise of individual investors and online brokers. Decades ago, few people had a brokerage account. And buying or selling a stock meant visiting or calling a stockbroker.
These brokers typically charged high commissions of $40... $80... even several hundred dollars or more. Today, most trades are made with a click of a mouse and for no more than $10 in commissions.
Combine that ease of trading in and out of stocks with the market's volatility and you have the perfect recipe for something that has proven disastrous for most small investors -- they are now holding their shares for unbelievably short periods of time.
The problem with this trend is that it's hurting how much money investors make in the stock market.
I recently ran a simple stock screen on my research team's Bloomberg terminal. I asked this piece of research software to show me all the stocks in the United States that have returned more than 250% in the past year. And to weed out the fly-by-night penny stocks, I had it return only stocks with market caps above $250 million that traded on a major exchange.
The result? Just five stocks -- five out of a total universe of 3,258 companies -- have gained more than 250% in the past year. That's the definition of trying to find a needle in a haystack.
In fact, I bet you've never even heard of any of these stocks... much less own any of them:
But then I ran the exact same screen... only I changed the time period to the past 10 years. The results are night and day.
In the past 10 years, more than 450 stocks returned more than 250%. That's roughly 100 times as many as the past year.
Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for September 22nd, 2014 | John Ransom
In Other News: Bi-Partisan Agreement that Debbie Wasserman Schultz is a Horrible Person | Michael Schaus