Sunday, 16 July 2017

Sell the losers and let the winners keep riding

For long term investing success it is important to ride a winner. 

Ever so often, investors make profits by selling their appreciated online stocks, but hold onto stocks that have declined in hopes of a rebound. 

If an investor doesn't know when it's time to let go of hopeless stocks, he or she can, in the worst-case scenario, see the stock sink to the point where it is almost worthless. 

Of course, the idea of holding onto high-quality investments while selling the poor ones is great in theory, but hard to put into practice.

If you have a personal preference to sell after a stock has increased by a certain multiple - say three, for instance - you may never fully ride out a winner. 

No one in the history of investing with a "sell-after-I-have-tripled-my-money" mentality has ever succeeded.

Don't underestimate a stock that is performing well by sticking to some rigid personal rule - if you don't have a good understanding of the potential of your investments, your personal rules may end up being arbitrary and too limiting.

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