A check-list to evaluate your selling of stocks.

Why are you considering a sale?

http://spreadsheets.google.com/pub?key=tHiylpG5cLz_2kpZc5W_iZA&output=html

Always buy, hold or sell based on fundamentals.

To summarise:

We should buy, hold or sell based on fundamentals.

The basic premise behind our "buy" strategy - over the long term, investors gravitate toward stocks with strong fundamentals because those are the strongest companies, and that causes those stocks' prices to rise over time.

If you're buying stocks based on the above basic premise, that is, they have strong fundamentals, and over the long term, stocks with strong fundamentals tend to rise, you should hold on to a stock as long as it continues to meet the fundamental criteria you used to select it.

It's time to sell and replace the stock with another stock that does meet your criteria (and one that thereby has better prospects of rising in value), if the stock's fundamentals have slipped, so that it no longer meets the criteria you used to buy it. Also consider selling, if the stock is grossly overpriced, not justifiable even by the good fundamentals of the company.


Price should always be related to the fundamentals.

We should NOT buy, hold or sell based solely on the price is low or high or rising or falling


Related posts:
Why we buy? Because of the fundamentals
Why we hold? Because of the fundamentals
Why we sell? Because of the fundamentals
Always buy, hold or sell based on fundamentals.


Because the goal is always:

• look closely at what to hold and what to sell now
• to maximize return on capital and
• to take advantage of the time value of money,

One must look forward at future prospects rather than backward at now-irrelevant old (higher or lower) prices.

Also read:
To guide you on holding or selling a stock in your portfolio.
To guide you in re-balancing and re-weighting of your portfolio.
Weathering a Panic
Stock Selling Guide - Gain/Loss Worksheet (Part 1 of 5)
Stock Sale Considerations (Part 2 of 5)
Evaluating Changing Fundamentals (Part 3 of 5)
To Sell or to Hold Checklist (Part 4 of 5)
Selling and Holding mistakes Checklist (Part 5 of 5)

Weathering a Panic

When you are caught in a market panic, the bottom-line reality question is whether capitalism in the United States and other major Western nations will continue to function after the panic ends. If the answer is yes, then there is no reason to sell at foolish levels.

In fact, the only rational thing to do is take courage and make buys. Being gutsy enough to act on our contrarian test - refusing to sell good stocks cheap because Wall Street and Main Street have lost faith for a few days - ensures that your earlier selling at better levels, or not at all, will prove appropriate.

It will be emotionally difficult to buy in a panic. those who can do so are demonstrably rational and therefore also calm enough to sell with discipline as the prior highs approached.

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When appropriate selling has left an investor with only a few, high-quality stocks, he can and should hold onto those gems and play through the difficult experience of a panic or crash. He will be holding only a relatively small portfolio, so his level of pain will be no worse than moderate.

His cash holdings will give emotional comfort and provide the resources for acquiring stocks advantageously when prices get really low and buying feels scary.

A comforting perspective for those less than 50% committed to stocks is that each decline means their cash is gaining stock-buying power faster than their remaining holdings are losing cash value! Think about that.

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Once the panic subsides, there is a lift in the market. But its effect is significantly different across various kinds of stocks. For some issues, there is a sharp snap=back rally; for others, very little improvement.

Just as it is not advisable to sell directly into the panic, it is prudent to reassess positions after the selling frenzy has subsided and an initial bounce in prices has begun.

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Decide in real time, what to sell and what to hold.

Selling should not be urgent because pre-bear phase tactics will have raised a lot of cash, so there is no need to sell to raise cash for margin calls or for new buying.

But because the goal is always to maximize return on capital and to take advantage of the time value of money, look closely at what to hold and what to sell now that the panic's dust has cleared.

One must look forward at future prospects rather than backward at now-irrelevant old (higher) prices.

Some investors may see a contradiction in the advice to hold the remaining few gems through the worst psychological heat, because earlier they were counseled that avoid losses is the first priority and the best reason for selling.

But taking a limited short-term dose of paper losses in a crash - by holding a few items of real quality - is a lesser risk than selling out during the fury and hoping to have the courage and good timing to get back in at lower prices shortly afterward.

------

Ref: It's when you sell that counts, by Donald Cassidy

Detail version of To Sell or to Hold & Portfolio Management

To Sell or to Hold (Part 1 of 5)

http://forums.prospero.com/n/pfx/forum.aspx?tsn=1&nav=messages&webtag=ws-naic&tid=27826&redirCnt=1

_____________________

Introduction

Decisions on whether to hold or to sell are rarely easy, and often there are no "right" answers. Everyone makes mistakes. Those who are wise learn from their mistakes.

Both individuals and clubs face the question of whether to sell or to hold stocks numerous times during their years of investing. If stocks are carefully selected, sell decisions are apt to be less serious and less frequent.

Although NAIC investors adhere to a buy-and-hold philosophy, they should not buy stocks and forget them. Over time, the management,industry, political climate, or economy can change. Sometimes, an original SSG may have included overly optimistic judgment. In either case, the original SSG needs to be adjusted.
___________________________

1. Guidelines for when to sell

2. Guidelines for when to hold

3. Common selling mistakes

4. Common holding mistakes

5. Worksheet to aid in making decisions on whether to sell or to hold.

_______________________

When to Sell? (Part 2 of 5)

First, we'll deal with when to sell.

Arguably, the most important reason for selling is because you need cash for retirement, college education, or other life events. You will still need to choose which stock or stocks to sell.

1. You could sell a stock that will improve your portfolio's diversification. You may want to sell some of the shares of a stock whose value exceeds the percentage of your portfolio that you set for it. For example, if one stock out of your portfolio of 15 comprises20% of the value of your holdings, you may want to sell some of its shares.

2. You could maximize your potential return by selling those stocks with lowest potential total return. Be sure your SSGs and PERTs are updated. Sort your portfolio on projected total return.(Click on the thumbnail projtr.ppt below to open up an example. You will need PowerPoint or the PowerPoint viewer to view this attachment.) Remember some of those stocks with potentially lower returns may be your least risky stocks.

3. You could sell a stock that will improve the quality of your portfolio. For example, consider selling stocks with erratic sales and EPS growth as shown in Section 1 of the SSG.

_____________________

When to Hold? (Part 3 of 5)

Let's talk about when to hold a stock.

I won't dwell on this, as it mostly follows from the selling guidelines. If you don't sell, you've made the decision to hold. There are just a few points I want to emphasize.

1. Hold a stock when there is temporary bad news. That is, if the bad news concerns a problem that is short-term in nature, consider holding the stock or even adding to your shares. This is easy to say, but it is not always easy to determine if the problem is temporary or long-term. If you read all you can about the company, its competitors, the industry and the economy, you will be better able to determine if the problem is temporary or not. Again, if you keep notes on your companies, you will understand them and the industry much better. Review your notes to help you decide if the problem may be long-term or not.

2. If it is near the end of the quarter, consider waiting to see the earnings release, especially if it's a high quality company - however you define quality. Some companies provide indications of what the sales and earnings are likely to be before the end of the quarter. In those cases, changes are likely to be built into the stock price. Some companies do not do this, so you may not know about new products, changes in growth an so on until after the earnings press release after the quarter ends.

3. Hold a stock if the price is down, but the fundamentals are strong. In the long run, the price will follow the fundamentals. In the short term, it may not. This may be an opportunity to add to your position.

Do you have any comments or questions?

____________________________________

Common Selling Mistakes (Part 4 of 5)

Let's talk about some common selling mistakes.

Although some mistakes in selling or holding stocks are due to lack of knowledge, most are due to emotion and/or irrational thinking. A vast collection of research shows that people often process complex information illogically. Thus, it is not unusual for people to make selling and holding mistakes. Some common selling mistakes follow.

1. Selling a stock just because the price goes down when the fundamentals remain solid. Some investors lose confidence in their judgments when a stock price goes down. They may adjust all SSG judgments downward due to the doom and gloom they feel from the downward price movements. During this last bear market, there were many comments on this Forum and on the I-Club-List indicating pessimism and fear. Think about how you feel when you check your stock prices and see lots of your stocks went down or one stock went down a lot or your stocks have gone down day after day after day. Do you feel happy? Worried? Nothing?

If the fundamentals remain sound, you may want to add to a holding, as buying at low valuations can bring a high return when investor fear and pessimism dissipates. NYSE stock prices fluctuate almost 50% in a given year on average, so don't panic if the price drops for no rational reason.

2. Selling a stock when there are short-term problems. Evaluate the long-term impact to prevent making sudden decisions that you may ultimately regret. Is this a company-specific problem? If it's due to the industry or economy, the problem is less likely to be long-term. Some company-specific problems may be short-term in nature too. Review your notes.

3. Selling winners too soon to "lock in gains." Investors sometimes become afraid that their winners will collapse if they hold them. They want certainty, so they sell out of fear. If you sell all your winners, you will be left with a portfolio of losers. Would you lay off your most productive employees when they exceed your expectations? Should your favorite baseball team trade its best player just because he has become such a big winner?

4. Selling a stock when its price has reached a predetermined price above or below the current price or your purchase price without regard to fundamentals. An executed stop-loss order will bring you less money than a sale at the current price. A limit order at a higher price, without regard to the fundamentals, may generate additional taxes and eliminate your chances of future gains. It doesn't matter where the price was when the stock was purchased. It matters where it is headed, and ultimately it will follow the fundamentals.

Do you have any experiences that you are willing to share?

______________________________

Common Holding Mistakes (Part 5 of 5)

Let's talk about some common holding mistakes

1. One mistake is to hold grossly overvalued stocks. Even the best run companies can become overvalued and be poor investments despite their good fundamentals. As soon as something diminishes investor enthusiasm for the stock, the price can plummet. Remember what happened with the computer hardware companies during late 1990s and early 2000? In the attached hardware.ppt, you can see how the prices of some well known hardware companies skyrocketed and then plunged when the Internet bubble burst.

We know we shouldn't hold grossly overvalued stocks, so why do we do it? A few reasons follow.

Investors often become attached to their stocks and see them through rose-colored glasses, particularly if they have owned them for many years and have large gains. Long-time employees who own shares of company stock are especially prone to attachment.

Some Investors avoid selling stock that is grossly overvalued to avoid paying taxes. By holding an overvalued stock, they assume more risk. Remember that you will have more after-tax funds if you sell when it is overvalued than if you sell after the price comes back to Earth.

Greed often blinds investors. They continue to hold stocks that are substantially overvalued, because they hope that the stocks will become even more overvalued. This is wishful thinking.

2. A second mistake is to hold stocks with deteriorating fundamentals. Sometimes you may buy a stock for sound reasons, such as growing fundamentals, but the company or industry subsequently changes. If the reasons you bought the stock no longer are in place, don't hold it. Ask yourself if you would buy the stock today under the current circumstances. If the answer is "no," holding it is likely a mistake. One example is the telecommunications industry. Can you think of other industries or specific companies where it changed?

Many investors become "married" to stocks and don't want to sell them even when the fundamentals deteriorate seriously, as they see their stocks through rose-colored glasses and wait for the company to turn around. This attachment is even more likely when it is the stock of one's employer, as it may seem disloyal to sell it. The latter situation is even more risky, as one could lose both employment and stock value if the company's condition worsens. You should have no sacred cows. It is prudent to cut your losses when things go wrong.

The difference between average and above average portfolio performance can hinge on what an investor does after making mistakes. All investors make mistakes, but most don't want to admit them. They focus on the amount of money they spent on the losers, and as long as they don't sell, they can cling to the hope of getting even. This strategy may cost money, as tax savings might be realized if the loser were sold to offset capital gains. The past cannot be changed; what matters is the future. You don't have to prove you were right, but you want to keep what you currently have. What is the best investment for the money? Do SSGs and SCGs on other stocks to see if another stock would provide a better return and less risk. Learn from your mistakes and move on.

Cognitive dissonance is the discomfort that is felt when someone encounters information that does not support a past decision. Investors have access to much information on the Internet, and there is data that will support almost any point of view. When investors encounter information that does not support a current holding, they tend to filter it out or discount it and focus on positive information. By doing so, they avoid cognitive dissonance. When I'm making notes on one of my companies, I find I have a tendency to filter out the negative news or risks. It is something I have to watch in myself.

3. When someone inherits a portfolio from a spouse or parent, misplaced loyalty can cause that person to hold investments that are not appropriate for his or her current circumstances. For example, the portfolio may be full of income investments when the inheritor needs growth stocks. The inheritor identifies the portfolio with the deceased and views changes to it as betrayal. It is important to realize that the loved on wanted you to make money, not to hold those investments forever.

4. Sometimes a stock can become a large percentage of one's portfolio. It may be overvalued or the company's fundamentals may have grown rapidly. Consider adding to other stocks in your portfolio. If you don't have money to add to other positions in your portfolio, consider trimming back the number of shares of the dominant stock, especially if it is the stock of your employer.

5. Some investors think that "buy and hold" means "buy and forget." They don't keep up with their companies and don't adjust their SSGs.

Have you encountered other holding mistakes? Do you have any comments or questions to share?

_________________________

_________________________

Defensive and Offensive Portfolio Management (Ellis Traub)

http://biwiki.editme.com/portfoliodesignandphilosophy

Portfolio Management

Portfolio Management is the buying and selling of stocks primarily based upon their fundamentals and secondarily based upon their valuation to optimize your portfolio's return.

After you've purchased a stock

We'll assume you have purchased a selection of 12 stocks that are well diversified by size of sales, sector, & industry. This is the job of BetterInvesting's Stock Selection Guide & Stock Comparison Guide.

These forms aid you in finding a quality company at a reasonable price. Now how do you manage them?

Portfolio Management Terms

Two terms you will constantly run into are defense and offense. These terms are used by Ellis Traub in hisToolKit 5 manual and in his book, Take Stock. They are taken from his experiences playing football.

Defense is practiced when the other team has the football. Withexcellent defense you'll prevent the other team from ever scoring and the worst you'll do is end in a tied game 0 - 0. With poor defense you could lose 0 - 70. Defense is important. Very Important.

Offense is practiced when your team has the football. It earns youpoints. If you have a strong defense and a strong offense could win 70 - 0. Defense prevented them from scoring any points and offense scored you a lot of points.

PERT Report

The PERT Report is the primary BetterInvesting tool used to follow a portfolio. To learn more about the PERT Report, click here.

Defensive Portfolio Management

With a portfolio of twelve stocks your goal will be to monitor their quality by quarterly checking that their fundamentals of sales, pre-tax profit,and eps growth and pre-tax profit margin are meeting or exceeding your forecasts.

This is called defensive portfolio management. If you don't check on your stocks and one develops a serious problem you will be holding a stock whose price is not rising because sales or earnings are not rising. If you sold this stock and bought another whose sales and earnings are still rising you would see a price increases. By holdingthe troubled stock you lose the potential return from the healthly stock.

This damage from holding a fundamentally flawed stock is the most important problem to avoid.

Offensive Portfolio Management

Once you have checked that your stock's fundamentals are intact you can proceed to offensive portfolio management.

The other case you'll have to look out for is when the stock's price gets way ahead of what its sound fundamentals will support. It has become grossly overvalued. Another way of looking at this is that the price has climbed much further than one would expect and will either come back down or just stay there until the fundaments catch up with it.

You could replace this fundamentally sound stock with another of equal quality whose price is in line with its fundamentals or behind its fundamentals and capture the excess profit of the first stock. You'd be capturing some extra profit.

Replacing quality (fundamentally sound), grossly overvalued stock with stock of equal quality and fair value to capture excess profit is called offensive portfolio management.

It is less important than defensive portfolio management, but to obtain maximum return potential you'll need to practice both. You don't have to perform offensive management. You must do defensive management.

Monitor Diversification

You started your portfolio with guidelines for the number of stocks you'd like, the maximum percentage of the portfolio you'd like in one stock and a desire to not be concentrated in too few sectors or industries.. You need to check these values periodically

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
future gains.



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.

To Sell or to Hold Checklist (Part 4 of 5)

http://forums.prospero.com/n/docs/docDownload.aspx?webtag=ws-naic&guid=4221d628-880b-401f-b302-c9bf73bf5ce1


To Sell or to Hold Checklist

Company: ______________________________
Ticker:_______________
Prepared by: ____________________________
Date: _______________


A. Consider Selling

􀂆 If you need cash
􀁻 Consider selling shares that will improve diversification.
􀁻 Consider selling the stock with lowest potential return.
􀁻 Consider selling the lowest quality stock .

􀂆 If company's fundamentals deteriorating
􀁻 Slowing or falling sales growth is warning sign.
􀁻 Check TTM growth rates in PERT A.
􀁻 Read about peers, industry, and economy to determine if problems
short or long term. Sell if problems appear long term.
􀁻 Consider selling if management keeps making excuses.
􀁻 Increasing long-term debt may be warning. Look at graph in NAIC
Stock Analyst or your favorite financial website.

􀂆 Adverse management changes
􀁻 CFO departs unexpectedly
􀁻 Several key executives depart
􀁻 Death of several key executives

􀂆 Significant increase in competition
􀁻 Watch to see if it affects profit margins in SSG and PERT A.

􀂆 Product problems
􀁻 Decline in pipeline, e.g., drug companies
􀁻 Same-store sales declining, e.g., retail companies
􀁻 Worsening product mix
􀁻 Increasing dependence on one or two products

􀂆 Customer problems
􀁻 Customer base shrinking
􀁻 Company becoming overly dependent on one or two customers

􀂆 Company's debt rating has been lowered
􀁻 Can be forewarning of future problems

􀂆 Indications of fraud or accounting problems
􀁻 Investors will be last to know if company falsifying financial data.
􀁻 If the source of information is credible, sell fast.

􀂆 Uncontrolled raw material costs
􀁻 If company doesn't hedge, it may have to pay higher prices for the
materials, which will hurt profit margins.

􀂆 Stock appears significantly overvalued
􀁻 Update SSG. Do not use overly conservative judgments.
􀁻 Forward RV is over 150%
􀁻 Upside-downside ratio is below 1
􀁻 Potential total return is less than money market fund or CD

􀂆 If you want to diversify your portfolio
􀁻 If one stock becomes large percentage of portfolio, try to add to
other positions.
􀁻 If you don't have money to add to smaller holdings, sell a portion of
the large position.
􀁻 If stock is a very small percentage of portfolio, add to it or sell it.

􀂆 If you want to improve portfolio quality
􀁻 Look for a higher quality company and compare them with SCG

􀂆 If company is acquired
􀁻 Do SSG on acquiring company. Sell your stock if SSG of acquirer
doesn't meet your standards.

􀂆 Take capital loss
􀁻 Can sell stocks in taxable account at a loss to offset capital gains
􀁻 Can use another $3,000 of capital losses to offset ordinary income
􀁻 Evaluate stock for repurchase after 30 days to avoid wash sale.




B. Consider Holding

􀂆 When there is temporary bad news
􀁻 Read about peers, industry, and economy to determine if
problems are temporary.

􀂆 If it is near the end of the quarter
􀁻 Consider holding to see the earnings release

􀂆 The price is down, but the fundamentals are strong
􀁻 Update your SSG and PERT and check the fundamentals

Evaluating Changing Fundamentals (Part 3 of 5)

Stock
Selling
Guide

Company: ___________________
Ticker: ___________________
Prepared by: ___________________
Date: ___________________

Douglas Gerlach http://www.douglasgerlach.com


C. EVALUATING CHANGING FUNDAMENTALS

REASONS CONSIDERATIONS

o EPS or revenue growth is slowing or falling.
· Company may be entering a new stage of slower growth or stagnation.
· If considering additional purchase, use caution. The worse a company performs, the better a value it may appear on the SSG.

o Quarterly pre-tax profits are falling.
· Use PERT graph to evaluate PTP.
· Three quarters of consecutive declining PTP are a danger sign.
· Five consecutive declining quarters are usually a definitive sign to sell.

o Cash flow is diverging from net income.
· If free cash flow is falling while net income is stable or rising, company may be "propping up" profits.

o Other fundamentals are deteriorating.
· Accounts receivable rising faster than sales.
· Inventories rising faster than sales.

o There has been an uncertain change of management.
· Dynamic company leader retires, replacement has questionable qualifications.
· Senior executives leave en masse.
· Those responsible for past success are no longer with the company.

o Company faces direct or indirect competition.
· Competitors threaten to affect the company's long-term prosperity.
· Companies with very high profit margins are often susceptible to increased, cutthroat competition.

o Company faces uncertain product cycle.
· Company is too dependent on single product.
· No new products in pipeline (such as pharmaceutical companies).

o Company has uncontrolled raw material costs.
· Can harm profit margins.
· If company doesn't hedge, they may have no option but to pay higher prices for necessary materials.

o Company is the victim of fraud or "accounting irregularities."
· If the books are being cooked, investors will be last to know.
· No way for investors to know if management is lying, or auditors are covering up.
· Get out fast; these are not quality companies.

o Company's debt rating has been lowered.
· Can often be an early warning sign of greater problems in the future.



D. FINAL CONSIDERATIONS

· Don't hesitate to sell in retirement accounts where taxes aren't an issue.
· Don't automatically buy because a stock falls in price; re-evaluate as if new.
· If you won't purchase additional shares of a fallen stock, why would you continue to hold it?
· Don't "wait to get your money back" from the stock – it doesn't know you own it.
· Don't be paralyzed by uncertainty.
· Don't be an ostrich with your head in the sand – face up to the problem.
· Remember NAIC's Rule of Five.
· Use Challenge Tree to continually upgrade your portfolio.
· Think "replace," not "remove."

Stock Sale Considerations (Part 2 of 5)

B. WHY ARE YOU CONSIDERING A SALE?

REASONS CONSIDERATIONS

_________________________________________________________
Not so good reasons
_________________________________________________________

x To "lock in a profit."
· WARNING: Trading results in higher taxes and commissions, and lower returns.
· Concentrate on cutting losses instead of "protecting your gains"

x Stock has reached predetermined limit.
· WARNING: Sell limit orders generate certain tax liability, possibly at higher rates.
· Eliminates the chance of any future growth in that stock.

x "Stock hasn't done anything."
· WARNING: Prices don't move in linear, consistent fashion, but in spurts.
· Remember that price growth follows profits, eventually.
· Determine if a stock is languishing for a reason.

x Company is subject of temporary bad news.
· WARNING: Avoid knee-jerk reactions, though market may respond negatively.
· Re-evaluate to determine possible long-term impact of news.

x Company has missed earnings estimates by small amount.
· WARNING: Focus on long-term, not short-term results.
· Re-evaluate to determine if there is a fundamental shift underway at the company.

x An analyst has downgraded the stock.
· WARNING: Analysts have short-term, not long-term, objectives.
· May have lowered rating to protect realized gains, not due to long-term potential.


____________________________________________
Good reasons
____________________________________________

o To raise cash.
· Consider it an opportunity to prune underperformers.
· If you don't have any underperformers, then consider tax impact of selling.

o To raise cash for club withdrawal.
· Consider it an opportunity to prune underperformers.
· Don't sell highly appreciated stock, transfer shares to departing member instead.

o The stock is possibly overvalued.
· Relative Value using forward PE is greater than 150%.
· Stock is in sell zone on SSG.
· Projected total return less than long-term returns on bonds.

o To take a capital loss.
· Sell stocks at loss in taxable accounts to offset any gains.
· Part of year-end portfolio review.
· After offsetting losses, can use $3,000 of capital gains to offset ordinary income.
· Evaluate for repurchase after 30 days (to avoid wash sale rule)

o To upgrade quality or expected return of portfolio.
· Determine round trip cost, amount to invest in new stock after taxes and commissions.
· Use Toolkit Challenger or Stock Analyst Cost of Switching tool to evaluate.
· Use NAIC Challenge Tree to evaluate.

o Because fundamentals have changed.
Proceed to Section C*. (*See next post)
http://myinvestingnotes.blogspot.com/2008/08/stock-selling-guide-part-3.html

Stock Selling Guide - Gain/Loss Worksheet (Part 1 of 5)

Douglas Gerlach http://www.douglasgerlach.com

A. GAIN/LOSS WORKSHEET

1 Cost basis of shares owned (Total amount invested) $
2 Total value as of this date $
3 Pre-tax loss/gain $ (= 1 - 2 )
4 Capital gains taxes due (if any) $
5 Round-trip commissions (to sell, then buy a replacement) $
6 After-tax loss/gain* $ (= 3 - 4 - 5)
(* This is also the starting amount of potential new investment)