Selling is as important as Buying

I always thought that Selling is more difficult than Buying.

When you sell, you either
1. Lock in a profit
2. Cut loss

Both involves Greed and Fear (Pain management) respectively.

Let's look at the 1st case of locking in a profit,
the main concern has always been,
"what if the price continues to go UP after I have sold the shares?"
I am sure most investors/punters/speculators face this problem whenever they are looking to sell.
That's greed for you.
So, how do we overcome it?

My idea is let's be greedy. Yes, greedy.

Say, you think the fair price of SGX is $9.
Set a margin of say 3% above the fair price and call it 1st trigger point.
So, in this case, the 1st trigger point for SGX is $9.27

Once, the traded price reached the 1st trigger point or $9.27, the profit will be locked in at $9.
That is, you will sell at $9 if and when the price comes down to $9.
No regret as u have allowed the price to run in the first place.

But if the price continues to go up another 10% from the 1st trigger point, u will set 2nd trigger point at $9.27*110% = $10.20
then, lock the profit at 3% below the 2nd trigger point ie
$10.20*97% = $9.90.

In this way, it allows you to participate in the madness of bull run while locking in profit at different intervals. It also allows you to get out of market in one piece if market somehow plurge.

Of course, the margins (10%,3%) are up to individual and must take into account the volatility of the shares and other factors.

That's a happy problem for you..

Now, the real problem is cutting loss.

For penny stock (ie market cap below 300m), a cut-loss trigger point must be set and strictly enforced. Majority of the penny stock goes down with general market but will remain where they are even when the market recovers.

So, don't buy penny stocks and if you really want, set a cut-loss trigger point. I learnt it through the hard way time and time again.

For dividend paying blue chips, my view is as long as the business is still viable, keep it. (Remember : Chartered Semi-conductor )

Any comments will be appreciated greatly.

Hi, always remember theory is there only to guide us. i keep on reading investment books and some of the books tell me accountant has so many "official leeways" of accrual accounting to make the company annual reports look much more better than it really is. Not to mention layman like us find it very difficult to spot anything fishy, so are the expert analysts. That's why from time to time we have pop-ups like "Enron", "Worldcom" and the latest in Japan the "Olympus".
In short, theory is one thing, practical is another. Yet we still need a Theory to plan our Practicals
Cheers!

If u hold Apple shares, 20% of your portfolio (I have ZERO by the way), will you sell, how much and why?

Yea, indeed selling is more difficult than buying.....

In fact, knowing When to Quit is the key in today fast changing investment environment.

Been thinking whether now is the right time to sell 1 of my investment ppty? though i do not need the cash...

If you find your property has gone up say by 100% above your purchase price and the rent only risen by 10% - I would say yes - sell .

(22-03-2012, 10:29 PM)soros Wrote: If you find your property has gone up say by 100% above your purchase price and the rent only risen by 10% - I would say yes - sell .

agreed, + some additions

Actual rental incomes should inline with value of property.

+ En-bloc Potiential.
+ HARD to get locations ,especially in singapore... Mt.Faber Top, for example...

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+ Emotional attachment.

DONT SELL YOUR PROPERTY...especially if its freehold! Leasehold, if make money, better faster chuck away

Easier if you are a dividend player.......u buy/sell when the asset is attractive or not attractive to you anymore