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In Finance, what is Staying Power?

Article Details
  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 13 October 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Staying power, as it relates to the world of finance, is the capability of an investor to hold on to a current position even though the investment in question has recently began to decrease in value. The term can be applied to situations involving a wide range of assets, including stocks, real estate, and other types of holdings. In most cases, the focus of the investor is on continuing to hold the investment until the downward trend reverses and the asset begins to generate a return once more.

One of the best examples of staying power has to do with the purchase and retention of shares of stock. Investors often watch for stocks that have the potential for long-term growth to go through a period where the value drops significantly. At that point, the investor purchases shares, and continues to hold onto those shares through periods where the market is up as well as down. While it is not difficult to hold onto stocks during an up market, it sometimes takes more effort and more foresight to retain control of a stock that is losing value in a down market. The benefit is that if the stock does convert from a fallen investment to one that is rising quickly after a slump, the investor stands to earn much more profit than was lost during the slow period. Thus, staying power can be seen as a valuable attribute when it comes to growing an investment portfolio.

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In order to ride out this period, the investor cultivates staying power by making sure the portfolio is diversified. As some securities go through periods where they are either flat or are decreasing in value, the investor is able to offset that activity with other holdings that are generating a significant profit. The end result is that the investor can make use of the losses to offset the gains when it comes to taxes, and still be in a position to earn a higher return once the securities recover and begin to increase in value once again.

With real estate holdings, staying power is a situation in which the investor is able to continue meeting mortgage payments and maintain investment property, even if there has been an unfavorable shift in the prevailing interest rate. Since an increase in the interest rate, especially when coupled with an economic downturn, can make it very hard to lease or sell the property, the ability to ride out the difficult times is very important to the overall success of the investment project. Assuming that the investor has enough resources to offset the losses sustained during a recession or other unfavorable economic circumstances, chances are the property will become a money maker once more, making the effort to hang onto the investment well worth the effort.

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