Galba and Sweet Adeline
If you are just starting out, I’d suggest you read the FAQ/Knowledgebase for this board that Neil does such a great job of maintaining and updating. It’s at post #4490 now. It’s a collection of posts from this board dealing with the philosophy of investing.
Here are some quotes from the FAQ/Knowledgebase dealing with the issues you’ve been wrestling with.
* One problem investors have is getting attached to their previous decisions and not willing to consider that they may have made a mistake. Not accepting that an investment could be a mistake is a dangerous error. I try to always reevaluate my investments and get out if i’ve made a mistake, or if information changes. Which is why I don’t hold stocks generally for 5 or 10 years. [Post 27]
•I make mistakes but I don’t regret my decisions. I figure I did the best I could at the time. I also don’t anchor on a price. For example when TSLA went from $30 to $75 in no time, I sold half my position. I then saw it continue up to $110. When it got back to $90 I got back in. I didn’t feel I had to wait for it to get back to $75 where I sold it.
•Never miss getting into a stock because you are waiting to buy it 25 cents cheaper. The decision is whether you want to invest in it or not. Once you decide, take a starter position, at least. Don’t wait around for a slightly better price. When it’s at $50, I can guarantee that you won’t remember or care whether you paid $10.05 or $10.30, but you’ll be kicking yourself if you didn’t get in. (For a concrete example, earlier this year I bought some shares of a little unknown company AMAVF at $15 and change. It hit $170 this week for an 11-bagger in less than a year. Do you think I care whether I paid $15.25 or $15.50? The issue is: Do you want to buy the stock? If the answer is yes, don’t fool around trying to buy it a bit cheaper. You are buying with a long term perspective.)
• * I’m in no way a trader. I never, ever, ever, EVER, buy a stock thinking I’ll try to sell it in a week or a few days for a small profit. I always buy for the long term, but sometimes decide I’ve made a mistake, and go on. And don’t worry about whether I made an error in selling. I worry about what I’m going to buy with the money. (I sometimes even buy something I’ve previously sold (YHOO, NUAN. NUAN was an error both times, and I got out both times).
• You’d be much better off staying nearly 100% in the market and just deciding WHICH stocks you want to invest in, instead of complicating it with deciding WHEN you want to buy, and trying to time the market. For example, you are saying that don’t want to buy now because the market is up, but I suspect you didn’t want to buy seven weeks ago at the bottom either, because then everyone was saying the market is going lower. And if these stocks go up 10% from here you certainly won’t want to buy, but if they go down 10% from here, you’ll wait for 20%, and then if they start back up you’ll wait for them to get back to down 10% again, which may never happen.
* I tend to sell a piece if my position has gotten too big for me to be comfortable with. (Usually, that means more than 10 to 12 percent of my portfolio. However, years ago when I was still working, and could add funds to replace losses, I seem to remember letting rare positions get to 20% if I was in love with the company).
I tend to sell a piece if I feel the price has shot up wildly. I did that with TSLA, selling half, but now that I have more information under my belt, I’m nibbling again and re-building my position again). On the other hand, BOFI has gone straight up for 5 months since I bought it, but my position isn’t too big (6.4%), the rise isn’t too fast or with lots of hype, their revenue and earnings are moving up, and the PE is still well under 20… so I’ve added multiple times along the way and added a little as recently as last week. In other words I don’t sell just because something is going up.
I tend to sell a piece if I feel the story has changed. I’ve had IPGP for a long time but the last few quarters they seem to be turning into a slow grower, so I’ve reduced to a half position. I sold out of AAPL as it seems to be becoming a value play instead of a growth play. I sold out of ISRG because of all the bad publicity with the head of the GYN Association saying it was overused and of no additional benefit. While they will continue to do well I figured that hospital boards would hesitate longer before buying a new machine, and with a high PE, a slow down would drop the price.
In general when I’m thinking of selling I seem to usually sell a little first while I’m evaluating, then decide for sure what to do. I might even decide to buy back the little piece I’ve sold if I reconsider. [Post 50]