Wednesday, January 28, 2015

When To Take Profit In A Stock?

When one should decide to sell the stock? This is one of the mostly sough after questions. Different people use different methods, and try to make a living.

Also, we should make it clear: being in the black, i.e. having gains to think about is a nice problem to have. As Mae West says, "Too much of a good thing can be wonderful", having too much profits might can be wonderful, for anyone.

Here is my perspective on the question of taking action in selling a position.

Taking action and not taking any action, are actually equal in the their functionality. A person who takes action to sell, is takinga real action by stating that the position has more downside risk (in case of long), than an upside move potential. On the other hand, a person who decided not to touch the position, states that the stock has more upside than a downside.

An investor, has to consider the time horizon he is considering to hold the stock and the respective gains he can receive. In any case, a person, who considers that a stock will move higher, has to consider a new target to be reached and think about selling then.

But, if a an investor sees another opportunity that might provide a better optionality in the direction of his trade, then he can also consider selling the position.

Another factor to consider the valuation of the stock. Once  the stock reached a certain valuation, then it might become not an attractive holding. As one of the investment gurus, said, a stock at a certain price is a buy, and at another price it is a sell. Therefore, if an investor consider the stock reached an unattractive valuation then he might consider selling some of the position, and holding to some of the position. This matter should be considered by the investor, abd he should take into his personal circumstances.

For me personally, when I hold a stock and have gains to be taken, I ask myself a question, whether I would buy the stock at a presrt price, if I didn't have a position in it. If my answer is definitely now, then I might seriously consider selling the position altogeter or sell some of the position.

Hope this information might help to my fellow investors.

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Why Companues Go Public: Rationality Comes First

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