The Motley Fool Discussion Boards
Stocks T / 3D Systems
|Subject: Should I Sell???||Date: 1/26/2013 1:10 AM|
|Author: dvena||Number: 124 of 586|
Hi Fellow Fools,
There have been quite a few posts lately due to run ups in several well followed stocks (DDD, NFLX, SSYS are just three examples). Most of these posts ask the same question in oh so many ways: Should I sell after the run up?
The answer to this question, like so many related to investing, is IT DEPENDS. The standard answer that most give, me included is this: It a stock has become too big a part of your portfolio and this is keeping you awake at night, then you should sell enough to get it back to a level you are comfortable with.
I do, however, want to give a more in depth answer, a different answer; because I think that sometimes it is not that simple. To illustrate, let me recount a piece of my personal investing history, using NFLX as an example.
I bought my first position in NFLX as one of my very first stock purchases after joining Stock Advisor in August of 2007. Being a new investor, I was very open to suggestion and had not yet developed my own investing philosophy. One of the first things I remember hearing was from the Jim Cramer ilk about taking money off the table and playing with house money. At the time, I did not know any better, but I now believe this is a fallacy. All the money in my portfolio is mine. I have earned every dollar in gains by leaving the money there. I would not be playing with house money; I am playing with my money. I listened to those voices and sold half of my very first position in NFLX because it had more than doubled by then. I bought at 17.10 and sold at 41.65. I was proud; because I have I had already taken out all the money I had initially invested in NFLX.
Here’s the thing. I think every investor does what we do for one reason: to make money. The question that each of us has to ask is will you step over a dollar to pick up a nickel? I believe that the holy grail of every investor is the elusive 10-bagger. They don’t happen all that often. This is the Super Bowl of investing. The 10-bagger (or more) is Moby Dick. This is the result we all hope to achieve. Yes, I know, everyone must wants to make money. Everyone wants to beat the market. But hidden down deep in the recesses of your investing soul, you want to conquer the beast.
If this is the case (if this is not you, you can stop reading now), we must answer the question, why do so few investors land the big one? Two reasons, the first of which is easy – finding a stock that will achieve this type of gains is not at all easy. However, we know that both Stock Advisor and Rule Breakers have both found them, so they are there in front of us. The second reason if much more complicated and sinister. I believe I know the reason and I want to share it! Are you ready? OK, here it comes: It is because investors defeat themselves. The amount of patience and perseverance it takes to achieve this feat is very difficult to fathom. When your stock goes up 10% or 50% or even 100%, you may be able to resist. But when the bags start to pile up, it becomes more and more difficult to resist the call of the siren. She will say things like “pigs get slaughtered” or “take some off the table”. I know - I fell victim to her call. If we are in this to make money, why do we run at the early signs that we are doing so successfully? Fear of failure, mostly.
I really love this quote by David Gardner. I read it and many other similar posts that resonated with me and has directed a good portion of my investing philosophy:
For any investors who have ever made a true ten-bagger -- a real-life investment decision with real money that plays into real consequences (really positive consequences) in the market -- I encourage you to ask investors that you know: "Have they ever actually made one?" -- I think we have t