I got this in an e-mail today from the Motley Fool.
Something tells me that they aren't talking about pennies!!!!
I added some of my own thoughts in bold.
THIS WEEK'S LESSON
WHEN TO SELL
Figuring out whether and when to buy stock in a company is only
part of the process for successful investors. You also need to
know when to sell -- and when not to.
Don't sell just because a stock or the market is falling, or
you've heard some rumors about the company, or someone tells you
to sell. Do consider selling:
- If you can't remember why you bought in the first place. Usually because it's going to the moon!
- If the company doesn't interest you and you don't keep up with its progress. I usually don't even know what the company's name is!
- If the stock has become significantly overvalued relative to
what you think it's worth. Consider the tax consequences,
though. (If you expect the stock to keep rising in the years
ahead, you might do well to just hang on.)
- If you don't know what the company does, its competitive
position, and exactly how it makes money. I should sell everything!
- If the company's financials are deteriorating.LMAO
If you'll need that money within a few years. Any greenbacks
you'll need in three to five (or more) years should be in a
less volatile place than stocks, such as money market funds.
- If you've made as much money on the stock as you wanted and
expected to.
- If the reason you bought is no longer valid. If you bought
shares of eBay for its high profit margins and then eBay buys a large supermarket chain, stop and think. Supermarkets are a different business, with lower margins. You might decide to hang on, but first reevaluate the holding.
- If you find a much more attractive place to invest your money.
If your calculations suggest that a holding is now fairly
valued and another stock appears to be undervalued by 50%,
transferring your dollars might make sense. Again, though,
consider tax effects.
- If a stock is your only holding. Portfolios should be
diversified. We suggest aiming to hold eight to 15 stocks. If
one grows to represent more than 33% of your portfolio,
consider rebalancing it.
- If you're only hanging on for emotional reasons.I've definitely had my share of those!
