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An Investment Management Company
Tutorial - When to Sell
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The desire to sell a stock often comes in three flavors. Either the stock has shot way
up and you are tempted to cash in your chips and lock in your profits (greed), the stock
has tanked and you want to run with the lemmings (fear), or the stock has done
absolutely nothing for too long and you've grown frustrated.
Once again, let's take the emotion out of the decision. Following are my guidelines:
If the stock price tanks, find out why and determine if the cause has affected the
Economic Moat or Intrinsic Value. If it hasn't, consider buying more of the stock at
this new discounted price (Courage man!).
If the stock has simply not done anything, hang in there. The lemmings will eventually
wander back and drive up the price.
Warren Buffett recommends we "buy stocks like we're Catholics --- marry them for life".
The compounding annual return of companies with big Economic Moats is amazing.
Just hang on for decades and become wealthy.
Now we're prepared to discuss portfolios, or the management of all our stocks together.
How many stocks should we keep in our portfolio? Is more better? Click Here to learn
about Portfolio Management.
up and you are tempted to cash in your chips and lock in your profits (greed), the stock
has tanked and you want to run with the lemmings (fear), or the stock has done
absolutely nothing for too long and you've grown frustrated.
Once again, let's take the emotion out of the decision. Following are my guidelines:
- Sell if the Economic Moat has been seriously eroded.
- Sell if the Intrinsic Value has been seriously eroded.
- Sell if the stock price is now significantly higher than the Intrinsic Value.
- Sell the portion necessary to keep any one stock from being greater than 15% of
the portfolio.
If the stock price tanks, find out why and determine if the cause has affected the
Economic Moat or Intrinsic Value. If it hasn't, consider buying more of the stock at
this new discounted price (Courage man!).
If the stock has simply not done anything, hang in there. The lemmings will eventually
wander back and drive up the price.
Warren Buffett recommends we "buy stocks like we're Catholics --- marry them for life".
The compounding annual return of companies with big Economic Moats is amazing.
Just hang on for decades and become wealthy.
Now we're prepared to discuss portfolios, or the management of all our stocks together.
How many stocks should we keep in our portfolio? Is more better? Click Here to learn
about Portfolio Management.
| Investing Wisely |
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| The advice contained within this website is general in nature, only for the use of FI Investments clients, and should not be relied upon without first consulting with FI Investments. |