If you spend any time reading about investing online, particularly cryptocurrency, you may come across the word HODL.
At first glance, it looks like a spelling mistake—and that is because it originally was.
HODL began as a misspelling of the word hold, but over time it became a popular investing phrase. It is often used to describe holding onto an investment through market ups and downs instead of selling when prices fall.
Some people also jokingly describe HODL as meaning:
Hold On for Dear Life.
While that was not the original meaning, it does capture the idea rather well.
What Does HODL Mean?
To HODL means continuing to own an investment even when its price is falling or the market is volatile.
Rather than reacting to every price movement, someone following a HODL approach may decide to keep their investment because they believe it could grow over the long term.
For example:
You buy shares in an investment for $100.
A few months later, the value falls to $80.
Instead of selling because the price has dropped, you continue holding because your original investing plan has not changed.
That could be described as HODLing.
Where Did the Word HODL Come From?
The term became popular in the cryptocurrency community after someone accidentally typed “I AM HODLING” instead of “I am holding” in an online post.
The spelling mistake caught on and gradually became part of investing culture.
Although HODL is most closely associated with Bitcoin and cryptocurrency, people sometimes use the term when talking about stocks and other investments too.
Is HODLing the Same as Long-Term Investing?
HODLing and long-term investing can be similar, but they are not necessarily the same thing.
Long-term investing usually involves buying investments that fit a clear financial plan and holding them for many years.
A long-term investor may still review their portfolio, rebalance their investments or sell something if their goals change.
HODLing is sometimes used more casually to describe refusing to sell regardless of what happens.
Holding investments through short-term market declines can be sensible, but holding something simply because you do not want to admit it was a poor investment is different.
Why Do Some Investors HODL?
Investors may choose to hold because short-term market movements can be unpredictable.
Selling during a market decline can turn a temporary loss on paper into an actual loss.
Some investors would rather stay invested and give their investments time to recover.
HODLing may also help people avoid making emotional decisions based on fear, panic or daily market news.
What Are the Risks of HODLing?
Holding an investment for a long time does not guarantee that it will increase in value.
Some investments recover after falling.
Others continue falling or may never return to their previous price.
This is especially important with individual stocks, meme stocks and cryptocurrency, where prices can sometimes change dramatically.
Before deciding to keep holding an investment, it may be worth asking:
- Does this investment still fit my goals?
- Has anything important changed?
- Do I still understand why I bought it?
- Am I holding because of a long-term plan, or because I am afraid to sell?
There is a difference between staying patient and ignoring warning signs.
HODLing During a Market Downturn
Market downturns can be uncomfortable, especially for new investors.
Seeing the value of your investments fall may create pressure to sell.
However, diversified long-term investors often expect markets to experience both good and bad periods.
Trying to avoid every decline can be difficult because nobody consistently knows when markets will rise or fall.
Having a long-term plan before markets become volatile may make it easier to avoid emotional decisions later.
Fresh Tip
Before buying an investment, write down why you are buying it and how long you expect to hold it.
Learn More
The Bottom Line
Patience can be valuable when investing, particularly when you have a diversified portfolio and a long-term plan.
However, HODLing should not mean ignoring new information or holding every investment forever.
The important thing is to make decisions based on your goals and investing strategy rather than fear, hype or emotion.