LTBH is fine in a 401K when you have 20 or 30 years before cashing out. When the time frame is shorter, if we've learned anything then it should be that to blindly hold onto one idea (Gorilla Gaming, LTBH) is very dangerous.
I will certainly agree that investment horizon issues should come into play when evaluating LTBH positions. To be honest, that's not an aspect of investing I've ever thought of, given my age, etc.
My point is just that a mechanical rule to sell when positions have risen a certain amount doesn't seem like a good idea, simply because it requires a lot more decisions, any of which one can flub.
You may think that the lesson of the past five years is that positions should be sold after a substantial raise, but I think the lesson is that buying, say, NTAP at 1000 times earnings (which I did) was fricking insane. It was a question of valuation, not simply appreciation. In fact, selling our successful G&K's in 1995 wouldn't have been a good idea, because they weren't overvalued, IMO.
You wrote:
I think that the market of the last 5 years has shown that not having an exit strategy is a sucker's game.
I agree with you, I just think that "sell when your stocks are overvalued" is a better exit strategy than "sell when you have big gains". I suppose I should have clarified that by LTBH I didn't mean hold indiscriminately, which is what many people often do (perhaps me too... but I shouldn't). |
