Gulo
FWIW, IMO you should sell when you think the price is fair or high on a value basis.
When to sell is the age old question. Books have been written giving the "how to"s.
I find myself a bit at odds with the conventional wisdom: "You never go broke taking profits". I'm not convinced that this statement is correct. If one doesn't let the profits run, then the losses from the losing positions (and we all incur them from time to time), just could outweigh the smaller gains taken if the "trigger" was pulled too quickly.
I have no advice to give anyone else, but I'll share a bit of what I do and how I look at the issue. It doesn't remove all doubt for me, by any stretch, but it does help me garner a few more dollars on the upwardly mobile issues.
I'll assume that my entry was based on sound analysis.
I think the first thing I have to admit to myself is that, while I may have a system (or several) for recognizing under-valued situations, I don't have a clue as to how highly valued a particular issue might become.
The second thing that I have to wrestle with is the issue of defining what motivates my desire to pull the sell "trigger". Emotion, Intuition, what? I've paid a decent price along the way in the development of my "hunches" and I've learned that they sometimes can be very valuable to follow and very costly to ignore. However, in all honesty, I can say that sometimes what I believed was a hunch was later discovered to be more emotion based (fear, greed, the usual suspects).
For me this is a dilemma because the line distinguishing hunch from emotion is often invisible to me when it is most crucial to have clarity. I help resolve part of the dilemma by having some kind of external (to myself) barometer by which I may gauge something entering into a "sell zone".
For me, what serves as the external barometer varies with almost every investment. This is because my methodology and analysis used to get into the issue is often different.
However, one consistent favorite is answering the questions: "Has the business model changed for the worse since you bought the company?" and "Has the profitability level declined?"
Another favorite is more TA in nature: "Is there a violation of a major long term trend?"
If the answers to these questions are negative, then I have schooled myself to withstand the discomfort and hold onto the company. My results so far have been very rewarding.
However, back to "hunches" a moment: If I see no external barometer indications requiring me to sell, but my hunches are just screaming at me to get out, I'll get out. But I will watch the issue after that to see what happens. I need to try to figure out whether my emotionalism is getting out of control, or my external barometer needs to change. That is if I'm bright enough to figure those things out! Often, I am not.
Timba |
