When do you take profits?

[redsfann]

1st, my apologies for not posting in this forum more often--as if anyone cares if I offer any input here, right? :mj07:


My question is this: Do any of you have hard and fast rules as to a dollar amount or percentage gain before you take profits? I never really have had a benchmark amount before taking profits--at least when dealing in blue-chip companies- i do when dabbling in penny stocks or other volatile securities--its really been if I feel the stock has continued potential to rise in price.

I bought two stocks back on 3/20, CEG and DEO. One has risen 15% since purchase and the other 10%. They are in my SEP so there are no tax consequences if I sell to realize a profit. I'm thinking of selling enough shares of each to take the profit and letting the rest ride.

Any thoughts from anyone on this strategy? What would you do if you were me? Thanks in advance for your thoughts on this topic.

 

[DOGS THAT BARK]

Wish I was sharp enough with the puts and calls as some Reds but basically just set stop losses and hope no catastophes hit in off hours. that way if you make 15% gain you can some what lock it in--and if it goes higher adjust profit as you go.

Try and stick to it and try and avoid dummy moves like I made not long ago.

had American Express for eons and had accumulated quite a few shares via splits--got wild hair one day in Oct last year because I didn't think they paid big enough dividend and sold it all @ $55 a share-- now $63 a share.

The stop losses work good for me in most cases because they take emotional moves like above out of equation --most of the time.

 

[selkirk]

Good question, good to see you in the stock forum Redsfann

believe there is no rule, however a few guidelines.
here are some examples.

1. if the stock is going up on a daily basis, and the market loves it. would just keep it and watch.

ie. bought fording coal, between 25-30cdn. had a target of 42.50 (maybe 45cdn.) went up and within (about ) a month hit 42.50.

sold it what a great trade. well went up another 80 dollars to its high. had only a small position left.

2. know what you own. for instance I bought Marathon Cdn. equity fund. at 10.50 avg. price. (late 90s) for a few reasons, made a great return.
the stock quickly went from 10.50 to 14.50.
the company though stated cdn. equity had a large amount of cdn. mining stocks,
so it hit a high of 16.50 and paid 1.80 div in just four months.

when bre-x blew up the fund loss around $2 dollars. I sold the second day. got just over 14. a few years later was at $7. when the story is over leave.

3. after a good run maybe sell half not all.
a good friend loved ipsco. bought in just over 29 cdn. then sold at 56cdn.

suggested to him that maybe sell half, take back you orginal and let the rest ride.
never did, however it did hit 170cdn.

4. always pay more attention to the stocks that are losing money or underperforming.

5. never dollar cost on a losing trade, instead ask why you have not exited the position.

6. keep winners and sell losing positions. hard to admit a mistake. one good reason for stop losses.

thanks
selkirk

 

[HoopsGuru]

5. never dollar cost on a losing trade, instead ask why you have not exited the position.

6. keep winners and sell losing positions. hard to admit a mistake. one good reason for stop losses.


These two suggestions above were probably two of the most important things i've learned from investing over the years. I cringe anytime i hear one of my colleagues mention dollar cost averaging when they are losing. Why would you want to add to a losing trade? The average investor is more likely to sell something when its up 20 % to lock in a profit than a stock that is underperforming because they want to look smart and wait for it to "go back up". good luck with your investments.

 

[redsfann]

Thanks for the great replies, gentlemen.

Dogs--

The stop-loss is a great idea. Here I am thinking I'm a pretty savvy investor and I never thought of using a stop-loss order in order to sell if the stock falls below a pre-selected price. I, too, wish I knew a bit more about puts and calls--but I have more than enough stress in my life betting sports...lol.

Selkirk--

Thanks for the kind words. Everytime I manage to spend a few minutes in this forum I tell myself to try and contribute more than I do, and it never seems to happen. Really like your #6 rule. Invaluable advice in my humble opinion.

HoopsGuru--

thank you for your imput as well. If more people would share things that have worked or not worked for them during their investing careers here in this forum, maybe someone new to the investing game will avoid some of the costly mistakes that many of us have made over the years.

I will update the forum when and if I make any moves with these two positions in the near future. I'll be on vacation starting Tuesday, May 15th, so any moves on my part will be at least a week and a half away.

 

[djv]

Some good ideas and info here guys. I say every person has his/her thresh hole and they need to find it. For me age is important being much older them most of you. I am much more care full now then I was in my 40's. When your retired and next Birthday is 65 you think different. I do same as dog does use and many others do. Set a %% gain and let it go. I never look back on a good profit. Might have made more at times yes. But the other way happens to. I also use different quantities to start with depending if it's speculative or long term. I believe some stocks should be strong long term plays and others for the quick play.
One thing for sure at least for me. Stocks let me retire sooner then just mutual funds would have.