Monday, 4 August 2008
Selling and Holding mistakes Checklist (Part 5 of 5)
A. Common Selling Mistakes
Price is down, but fundamentals remain solid
Prices fluctuate for reasons that are not always rational.
The price will follow fundamentals in the long run.
Consider buying more shares.
The company has short-term problems
Do not make a rapid decision.
Look at the long-term impact of the news.
Selling winners to lock in gains
If you sell all your winners, you will be left with losers.
If your winners are high quality companies, they are likely to
become even bigger winners.
Selling because the price reaches a predetermined limit
An executed stop-loss order will bring you less money than if
you sell at the current price.
A limit order at a higher price, without regard to fundamentals,
may generate additional taxes and eliminate your chance of
B. Common Holding Mistakes
When fundamentals deteriorate
If your evaluation indicates this is a long-term problem, holding it
is likely a mistake.
If you wouldn't buy this company today, don't hold it.
Trying to get even when you have a paper loss
You can't change the past; what matters is the future.
Would another stock be a better investment? Prepare an SCG.
Remember the NAIC Rule of 5.
You may be able to offset some capital gains with this loss.
Holding inherited stocks out of loyalty
These stocks may be inappropriate for your financial situation.
The person who left you the stocks would want you to do what is
best for your circumstances.
Not following your stocks after purchase
"Buy and hold" does not mean "buy and forget." Companies change.
Keep up with the news on the company.
Maintain your SSG and PERT.