Junior,
For those who are buy and hold types (and I am one of these as well in most instances), if your cost basis is such that you are already profitable in your position then you have the comfort of knowing that any correction does not equate to loss of principle, but is rather, merely an opportunity cost.
That is why it is so important to time one's investment in high quality companies so wisely so that they have the least risk of loss to their principle.
A story I have related before here is exampled by how my wife bought GNET on a whim a week before PA made his investment. We had the stock at $82 pre-split, and it ran to $199. When it failed to penetrate $200, I STRONGLY ADVISED HER to sell or purchase put options.... at the very least sell calls against her position in order to lock in some profits. This was based upon my opinion that the gap-up in GNET stock price would result in at least a 30-50% retracement in a consolidation.
She failed to do this and the stock retreated to $90 and change during last spring internet carnage. Faced with the loss of principle should the stock decline even more, we both finally agreed that the risk was too great and we sold. I then put her into CCUR at $6 (based on Soundview becoming a Mmkr in that stock).
When GNET started moving back up, she sold the CCUR at $7/share and purchased GNET again POST-SPLIT at $92. Again, I STRONGLY ADVISED HER to sell the position or purchase put options in order to protect her principle and find a better purchase point based upon GNET failing a double top technical formation. Again, she ignored me and remains underwater on her position.
In the meantime, CCUR has gone from $7 to a recent high of $23 and change.
Timing the entry and price level of a position is OH SO IMPORTANT to an investor's ability to sleep at night and feel comfortable holding through the inevitable corrections in a market.
Btw, I'm not comparing CCUR to GNET necessarily. It only represents my perspective where I don't care what stock I'm in, so long as there is more upside than downside.
Regards,
Ron |
