This question is one of the most popular stock market investment management concerns that I hear from Minnesota investors. The answer has a great deal to do with long-term investment management success.
As of this morning, the benchmark S&P 500 Index is more than 5% off its peak level of January 15th. Today is a great time to revisit one of the most important stock market investment management questions.
I always remind my clients that the best way to answer the “when to sell?” question is to break it into two smaller questions.
First, are you selling to make the most profit that you can? Most stock market investors don’t have the expertise to buy a stock market investment at the right time. They also don’t know when to sell a stock market investment at the right time. Their best hope for stock market success is to take as much profit as possible.
One all-time best Wall Street adages adage is that “you never go broke taking a profit.” If you feel good about your stock market investment return, it is best to sell part or all or your investment and lock in your investment gains.
Second, are you selling in order to stop worrying and get on with the rest of your life?
Emotions play a big part of investment management. Most stock market investors feel worse about losing money than they feel good about making money. I recommend my stock market clients always set a stop loss on every stock market investment they own.
Stop losses allow stock market investors to keep their stock market losses to manageable levels. It is a lot easier to get you money back from a 5% stock market loss than it is from a 40% stock market loss.
Everyone loses money at some time in the stock market.
Stock market investing is much less difficult when you have a plan to take your gains. Sell when it feels comfortable. And learn how to keep your losses small.
Ric Lager
Lager & Company, Inc.
