Hi Keith,
In re-reading Mr. Phelps' book, I came across this beauty:
"(For a stock) To go from $1 to $100 in 25 years, the price must increase at a compound annual rate of more than 20 percent, not including dividends. The seller of such a stock after 20 years (five years too soon) gets less than $40 for each dollar before taxes and brokerage commissions. The remaining $60 for $1 comes in the last five years if the rate of price increase is constant."
If that isn't a good reason for maintaining patience, I can't think of one. I've been facing this quite often while doing my "spring cleaning." Mr. Phelps comments, "it can be argued that selling (out of a position) is a confession of error." But he also says "The only thing worse than making an investment mistake is refusing to admit it and correct it."
Just to rub all this in, I sold out of IDTI recently at $8 and have officially missed an extra $0.50 so far in just a week! Still, the house cleaning needs to go on. Some of these companies are just not doing what they should! Mr. P states "Never, if you can help it, take an investment action for an non-investment reason." That must be similar to If it ain't broke, don't fix it! It's hard to determine if a stock is "broke" or just in a holding pattern. More often than not, I'll sell out of a stock because of a lack of AIM activity. This has usually been in conjunction with something that has changed that has lessened the future potential of the company as I've viewed it. This calculation needs to be done on an "after tax" basis if in a regular account. If the stock is "okay" on a pretax basis, then the next stock I buy has to be that much better to make up for the taxes paid to Uncle. So much about which to think!!!
Best regards, Tom |
