Having been a member of 3 different services, I have accumulated a large assortment of suggested stocks. Approximately half of them are sufficiently in the red to put me several points below the S&P. I know that I get advice when to buy, is there advice on when or what to sell? What also concerns me is that most of the stocks in the red are showing as green on the S&P side! What am I doing wrong?
When to sell is a failing of a lot of pundits! One strategy is when you buy, to put a stop-loss order in place. 10% below the buy price has been suggested. Or better, look at the chart of the stock and decide where the support and resistance are. If the stock breaks down through support, the technical wisdom is that you should be out of it. A problem with this is that when unfavorable news comes out, the whole market can be down a bunch, so some recommend a "mental stop"--in other words, if the stock breaks down through the support level, take a good look at it. If this was on a day when most stocks are up and there isn't any news that would obviously be a problem, then look extra hard at selling. Getting good entry points is somewhat easier than good exit points. \Placing a stop when you buy is psychologically easier than admitting to yourself that it was wrong to buy in the first place and making that sell decision under pressure. Every strategy backfires sometimes. It isn't easy. Best wishes, Chris
Having been a member of 3 different services, I have accumulated a large assortment of suggested stocks. Approximately half of them are sufficiently in the red to put me several points below the S&P. I know that I get advice when to buy, is there advice on when or what to sell? What also concerns me is that most of the stocks in the red are showing as green on the S&P side! What am I doing wrong?Well, I really don't know your own personal situation. All I know is that you've been a member of 3 different services and you've accumulated a large assortment of suggested stocks. From that, I'd say that you have been a member of 3 too many services and have bought suggested stocks, [i.e., bought on "stock tips"]. Maybe the thing to do is to focus on learning, reading, frequenting the free boards for insights from the many knowledgeable individuals who post here, etc. Have you thought about the ideas of living below your means, getting rich slowly, studying master investors, avoiding "stock tips" and most of the ephemeral financial news media, etc.?Many investors advise keeping a journal. Here you can keep track of your reasons for buying something. If things don't work out as you you anticipated, then you can see where the problem was: e.g., the company's market position was suddenly threatened by a competitor, the CFO was caught embezzling money, etc. Maybe you'll find that you have to do a better job assessing the competition, examining the management, etc. This way we learn by experience (but reading and studying can be a less costly and less painful way of learning!).culcha
Here are my rules for selliing stocks. First this is for my taxable account and I have 19 stocks right now although about six years ago I was up to 27. At 20 positions this would mean that each stock should be about 5% of the total portfolio. It's also pretty well diversified between industry groups and market caps.1. Pass my pain to Uncle Sam. When a stock goes down I either double down on the stock or I just sell and get out of the position and take a capital loss on the stock so that I take the maximum $3000 tax deduction. Even on strong years for stocks, I can still find losers to sell or use carry over from previous years and lower my tax burden. 2. Rebalance. I sell half of my position if that particular stock is 10% of my total portfolio. Think of it as rebalancing. Cut the big winner and redistribute it to the mediocre. This usually means that a particular stock will have to increase by >130% over a year or less. For instance if the other 19 holdings tack on 20% over a period of time, the one great stock would have to gain 153% in order to hit the 10% of the portfolio rule. This hasn't happened often as it is pretty rare to get a stock to go on a tear. My largest holding right now is only 7.75% even though it has had 134% increase since I purchased it four years ago. In order for the stock to trigger right now it would have had to gain by 210%. 3. Let someone else decide. Write a covered call. What it really does is forces you to make a decision now at to what price you would sell at. Example would be Transocean(Rig) last traded for $53.76 and I decide that I should sell. I can write a call option for Jan 2013 at a strike price of $55 for $6.85. I am basically setting my sale price at $61.85 at some time in the next year. Since I hold the stock, I collect the dividend until the option is excercised. This isn' always a tax friendly option, but in a tax protected account it maybe a viable option. If the stock stagnates or goes down and the option expires, write another one. The premium + dividend can really provide a decent yield even if the options never get excercised.C2H5SHno position in RIG ;-)
It kinda matters Why you bought the stock in the first place ;^)In P. Money Lynch'sOne Up On Wall StreetIn Chapter 17...The Best Time To Buy and SellHe says:When to sellHe reminds us that he doesn't "..pay to much attention to the science of wiggles (technical anaysis)."And admonishes us to avoid 'premature exit'....basically, don't sell a tenbagger when it's just a measly little ole' fivebagger. ( A fivefold gain on $10,000 is $50,000 and the next 5 fold is $250,000.)Avoid "premature exit".Also avoid the drumbeat effect....a particularly ominous message is repeated over and over untill it's impossible to get away from it.Every single dumb idea you hear about a stock or portfolio gets stuck in your brain.When to Really sellIf you know why you bought a stock in the first place, you'll automatically have a better idea of when to say goodbye to it.So write it down !! Start an Investing Notebook , today .-For Slow Growers he doesn't "own many" though he sells when the fundamentals have deteriorated, no new products, little R&D, diworsification.-For Stalwarts he rotates, replacing when the price gets above the earnings line or the p/e strays too far from it's norm.-For Cyclicals he sells at the end of the cycle (anyones guess?) or when something has actually started to go wrong.-For a Fast Grower the trick is not to loose the potential tenbagger. The main thing to watch for is the end of the second phase of rapid growth as explained earlier (chapter).- For a turnaround it is when everyone knows all the trouble is over, debt has declined, inventories are rising , and/or the p/e is inflated relative to earnings prospects.-For an Asset Play he offers examples to wait for the raider, a takeover, bidding war, and /or a leveraged buyout.valuation , valuation , eh.When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 that went to $2, but then they later went to $30. You just don't know when you can find the bottom.Peter LynchFool on , sir cabincruserwho in the past has experienced 'premature exit' and now says Viva Motley Fool!Ensure that you are healthy enough to engage in investing opportunities and watch out for Foolishness as it may cause a sudden drop ... or rise ... in blood pressure.
there are many strategies you can implement from merely both a technical and/or price action perspective. stop losses are a very popular example, but please keep in mind a stop loss will not protect you in an overnight or over the weekend gap down/black swan type event.i would suggest begin with looking at the genesis of what motivated you to take the position in the first place. has something changed since then, i.e. has the company put on a bunch of new debt on the balance sheet, is there something going on with cash flow, has there been a significant short fall with respect to earnings, has the dividend been cut?once you have ruled out any red flags, it might just be a matter of bad timing. especially present day, prices in the short term can be random as the volatility of the markets go up and down nearly on a daily basis. and in the last year in particular, given how far individual equities have rallied off the djia 6700 bottom, in many cases even large stocks moved up 4X+, things get a little over extended and all it takes is a little pull back to put you in the red pretty quickly. just think back to the price action in the october and the early january pull backs. in less than 5 trading days the djia as of yesterday had dropped something like 700ish points.but for sure, stock picking has become a much more difficult task than it used to be when i started out in the mid 1990's.
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