If you own a stock, you have an open position. The question to be answered here is how long you should hold that open stock position. You have to appreciate that there is no 'right' answer, because there are many different ways to make money from trading. Some will involve holding a stock for years, while others may hold that same stock for 5 minutes. However, you shouldn't just blindly follow the oft-quoted advice to buy quality stocks, lock them in a drawer, and forget them. If you've back-tested that strategy with positive results, then go ahead. However, from a personal point of view, we feel that a more active strategy may yield better results.
Take a look at the following chart of the Dow Jones Industrial Average ('the Dow') over the 10-year period from May 1999 to May 2009:
It is clear that over this period buy-and-hold would have been a disaster - buy at 10,000 and at the end of 10 years it's worth 7,000. OK, so this chart contains the little matter of the sub-prime crisis in 2008/9, but even if we leave that period out, the market went nowhere until 2006, i.e. 7 years. We do accept that it is easy to be right in hindsight, when we can see the whole of the chart, and it is much more difficult making decisions at the right-hand edge, but it still seems to us that a simple trend following system would have outperformed buy-and-hold, catching the upmove in 2006 and avoiding most of the drop in 2008/9. Proponents of buy-and-hold would have us update this chart for the 10 years to 2011, which will show a much better result. However, it seems to us that if you have an occasional need to withdraw some of your your capital, you may be forced to liquidate at an unfavorable time, such as the end of 2008. If you had taken a more active approach and locked away some of the rise from 2003-6, you would certainly be in a better position.