Comments on: If You Buy When The Market Is Down, When Do You Sell?

By: Roger

Roger — Sat, 08 Nov 2008 03:50:20 +0000

Good advice, Trent. I would argue that there’s a third good reason to sell: to rebalance your portfolio. If you find your assets differ significantly from your ideal asset allocation (and you have no reason to change your asset allocation given your current situation), it might* be worthwhile to sell the outperforming parts of your portfolio and add funds to the laggards. That way, when the market readjusts, you’ll benfit by having bought low and sold high (or in our current market, by selling low but buying even lower).

*I say might, because there are tax issues (in non-retirement accounts) as well as commission costs (for stocks) that must be considered before selling assets to reallocate. Plus, if you are not that far from your ideal allocation, it may be possible to readjust simply by shifting your contributions.

By: Margaret

Margaret — Sun, 18 Nov 2007 15:30:52 +0000

Advice I have read — set prices at which you will sell both BELOW your purchase price (to keep you from holding on to a losing stock) and above. Also, you can always sell SOME of you stocks to lock in a profit. Easy example – if your investment has doubled, sell half – that is, take back your original investment.

By: Jamie

Jamie — Tue, 06 Mar 2007 23:43:17 +0000

Remember what that one kinda smart guy from Omaha said: My favorite holding period is forever.

By: Lazy Man and Money

Lazy Man and Money — Tue, 06 Mar 2007 22:45:15 +0000

Good advice all around. My comment was more about the media that says to buy during even times and buy more during quick downturns (picking up bargains on the cheap). The media rarely says to take some chips off the table.

That said, sell when “the investment no longer makes you feel confident.” is tough specifically because an individual investor feels most confident when the market is at the top.

As for “It’s much easier to see that you’re getting a good buy when the market goes down” I was in that camp for some time. In 2000, I bought on the initial pullback of tech stocks. With the Nasdaq at 5000+ getting in at 4000 was a 20% discount – great as long as it doesn’t drop to 1200 as it did. Similarly, I bought a good portion of Worldcom (a solid blue chip with real world assets) several times due to it being “a bargain.” We know how that went. In general I like this advice, but it can be hard to decern a whether a free-fall is going to take place after the first 5% loss.

By: jake

jake — Tue, 06 Mar 2007 21:01:17 +0000

Another tip that I also like is to set a price that you are committed to selling. Lets say your stock is currently at $15 and through research you know that you should sell at $20-$25, set the price and commit to selling when you’ve reached it.