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When Should I Sell

Summary

Have a Mission Statement

Have a method to evaluate if you are achieving the goals of that Statement

Have the discipline to only buy stocks that meet your criteria and sell them immediately when no longer make the grade

In a previous post I stated that the number one question I receive is What Should I Buy?  Well, the number two question and the one I feel is most important is When Should I Sell???

My answer is that depends.  It depends on your objectives.  Why are you investing?  How much can you afford to lose?  What is your age?  What is your time frame?  Is this taxable or tax deferred money?  And the questions go on and on.

I can only tell you when I sell.  I'm 70 and have accumulated most of my assets in tax deferred 401Ks, IRAs and IRA Rollovers.  I am past my accumulation phase and will soon turn 70 1/2 but will use the one year deferral to postpone withdrawals for another year,

Managing your portfolio is a business --- hopefully a profit making business and every business should have a mission statement.  Mine is:

 The 3 top objectives are:

  • Capital Preservation - Retirees can't take chances
  • A conservative rate of return that exceeds my withdrawal rate, plus taxes and inflation
  • A positive rate of return that beats the market at a lower Beta.

Make sure you have a mission statement too and a method to make sure you can evaluate your effectiveness.

After a stock is added to my portfolio I want to make sure I achieve two objectives:

  • A Positive Rate of Return, and
  • A Relative Rate of Return compared to my benchmark (The Value Line Arithmetic Index in my case).

To accomplish that I use a Barchart Custom View screen that includes:

  • My benchmark as a position
  • Weighted Alpha
  • Barchart Opinion
  • 100 Day Moving Average
  • 50- 100 Day MACD Oscillator
  • The Percentage off the 52 Week High

In addition I use:

  • Trend Spotter
  • Percentage change for the 1, 3 and 6 month periods

I can then sort for any of these factors to gauge not only my Absolute Return (or loss) but my Relative Rate of Return.

I inverse sort so my worst performing stock for any sort criteria is on top and then use the Flipchart feature with the Trend Spotter, 20, 50 and 100 day moving average so I can get a visual gauge of my holdings.

I know this is an ugly chart of Valeritas (OTC:VLRX) but it shows my point:

Remember only you can say when a stock no longer meets your individual criteria, it's all up to you.

My best advice is to have a predetermined criteria for what stocks meet your mission statement.  Only buy stocks that meet all the criteria and sell stocks when they no longer meet the criteria.  I do this every Friday.

If you are not disciplined, know where you're heading and willing to spend the time then DO NOT INVEST IN INDIVIDUAL STOCKS!  Either pick a good active fund manager or invest in passive ETFs using an Asset Allocation Model --- even then you must have a predetermined discipline to say when you've have enough.