Difference Between Position and Holding

In the vast field of Finance, investment seems to be common these days. Every individual starts to explore investment and trading. As a beginner in the stock market, you must know these terms for better performance in the marketplace. Let us explain the terms holdings and position in brief.

What is Position in the Stock Market?

The position defines the ownership of an investor for a particular asset or security for a specific duration of time. It also denotes the number of shares an individual holds of a specific stock or financial instrument. 

If an individual decides to take a position, when he is ready to buy a stock for its bullish intent or sell a stock for its bearish intent. If someone wants to open a new spot, he must end the existing or current position.

Types of Position

There are two types of positions available in the stock market, which are as follows: 

Long Positions

A long position is defined as an investor or trader usually holds a stock or share for a long period of time to gain more profits. Long positions are considered profitable when there is a rise in price and a loss when there is a fall in price. So an investor aims to sell the share for a higher price than its purchase value.

Short Positions

On the other hand, a short position is considered to be profitable when there is a fall in price. The borrowed shares should be sold at a higher price and bought back at a lower price to see more profits.

What is Holding in the Stock Market?

Holdings are considered assets held by an individual or a company’s investment portfolio for a long time such as a mutual fund or a pension fund. Any asset that holds capital and can be traded in the market such as stocks, mutual funds, bonds, futures, options, and exchange-traded funds is also included in the portfolio of an investor or a trader.

A portfolio that consists of a variety of assets will produce long term profits with low-risk management. 

Types of Holding

The number and types of holdings in the portfolio pave the way for diversification. Having a variety of holdings in a portfolio increases the profit rate as well as decreases the chance of loss. Diversification plays an important role in the risk management of an investor’s portfolio. There are three types of holdings which we have to know as follows.

Equity Holdings

• Equity holdings enclose the shares or stock possession of rights in a company. Investors benefit from gaining a portion of a firm’s profit and also may have the right to vote during shareholder’s meetings.

Fixed Income Holdings

• Investments in bonds or other debt securities are included in fixed-income holdings. An investor may receive a monthly interest rate and provide the principal amount upon maturity.

Alternative Holdings

• If an investor chooses to invest in real estate, commodities, and other hedge funds is called alternative holdings. These non-traditional investments may offer diversification and allow investors to invest in a variety of sources and have a low chance of co-relating to traditional investments.

Position vs Holding: Key Differences

1. Time Span 

The main difference between Position and Holding is Time span. The position is an exposure of an investor to buy or sell his share or stock based on the bullish or bearish intent. Whereas Holdings refers to having a specific share or stock in an investment portfolio for the long term to get better profits.

2. Benefit

While comparing both, Position stands for the intent only. If the market’s intent is bullish then you have to buy a share or stock and if a market’s intent is bearish then you have to sell your share or stock for better returns or profits.

But Holdings is different from this. Holdings seem to be profitable only if you hold the share or stock or any financial instrument for a very long period of time.

3. Known and Unknown

In Position, you know the transactions made through bullish or bearish intent whereas in Holdings this is unstable. According to the market fluctuations the returns or profits may vary to the investor.   

Bottomline

From the above explanation, we came to know the details about the Position and Holdings of an investor in the stock market. These two are considered the basic foundation for the stock market for a beginner to explore vast things in the stock market.

If you have lumpsum in your hands then try holdings for your investment or if you have a very decent amount and time to start your journey in the stock market, it’s perfect for you to start from a position. 

By understanding the bullish and bearish intent you can buy or sell your share or stock for better profits. But make sure to develop your technical knowledge in analyzing the market fluctuations and emotional intelligence should be high to avoid making emotional decisions.

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