When is it time to sell?

Mrs_Z

Hi to everyone,
Just wondered if forum members here had their own 'rule of thumb' when to sell their well performing stocks? When you have doubled or trebled your original investment? Would you sell the lot or just withdraw your original investment with some interest and leave some behind?

I'm totally novice to investing but dabble a bit with funds (only what I can afford to lose so to speak). Some time ago I invested in Russian funds and was lucky as they performed well. I sold when the original investment had trebled. Turned out to be a good move.

I also have some exposure to India which is on the up at the moment (it's taken 7 yrs!) and I'm starting to think when to cash in....

Linton

Dabbling in shares/funds is for fun, it's not investing for long term wealth. If it's for fun, does it matter when you sell? I suppose it's more exciting to sell the lot and buy something else when you have made a packet.

If you are more concerned about building up your assets you need a structured approach. A basic general strategy....

1) Decide in advance what areas you are going to invest in and in what %s. Ensure you have a broad range of areas. Perhaps not more than 20% in anything too specific, such as one minor country (minor in relative economic terms). Dont keep on changing your strategy.

2) When you buy have a clear reason compatible with (1).

3) You sell when the % gets significantly high compared with (1) or the investment no longer meets the purpose for which you bought it.

The effect is that when a fund performs outstandingly well, after a time you sell most of the excess and buy into something completely different, normally something which is currently performing relatively poorly.

EdGasket

You have to decide if the price is expensive relative to how well the company is doing. The price might have become 'over-optimistic'.

Another 'test' you can apply is 'Would I be happy to buy shares at the current price?' If the answer is definitely no then maybe it's time to sell.

There is no easy answer. I find selling harder than buying because if you buy something and it falls a little, it may come back up again but once you've sold that's it, all gone. As a rule prices go up more than you think and fall more than you think they will.

Hope this helps.

jimjames

I sell when I need the money

Vortigern

You might also consider selling some (unwrapped) shares to make use of your CGT allowance.

pinkdalek

jimjames wrote: »

I sell when I need the money

Probably the best and most responsible answer yet.

Unless you need the money don't get hung up, they are only worth what they are printed on paper, which is sod all until you sell.

ColdIron

Investing for the long term is not like poker where you take your money off the table when you're 'up', for many it will be about providing income. The tried and trusted method of periodic re-balancing to a fixed asset allocation is probably the simplest approach and removes the decision making aspect which may be no better than guesswork

dunstonh

Just wondered if forum members here had their own 'rule of thumb' when to sell their well performing stocks?

Are you trading or investing?

brasso

Good question. Like most dabblers (I suspect), I don't have a formula or a particular trigger because circumstances vary so much.

Sometimes I sell when the share is on a long plateau after an early gain. Sometimes when it simply seems to be in terminal decline with no prospect of recovery. Sometimes when I've had a large gain and decide to be satisfied with that. And other reasons too, like wanting to buy something else.

Given that it's unscientific, with too much sentiment and emotion at play, I've moved back into passive investments over the last year, and am glad I have as it's less stressful trying to address the question you've posed.

I still have some individual shares that I'd like to get rid of but I'm reluctant to sell for less than I bought, as they are major companies that seem good enough to recover. But this might be quite irrational as I could sell and buy some funds that will creep up over a period, despite occasional small dips.

Probably not a very helpful answer!

TrustyOven

brasso wrote: »

Good question. Like most dabblers (I suspect), I don't have a formula or a particular trigger because circumstances vary so much.

The Monevator blog has some good stuff on this.

http://monevator.com/how-to-rebalance-portfolio/

http://monevator.com/the-simplest-way-to-rebalance-your-portfolio/

http://monevator.com/threshold-rebalancing/

Thrugelmir

I sell when I have a reason to.

Also there's something else that (to me) offer better value to invest in.

On balance I sell those that lose me money while letting my winners run.