I know investing is not always easy. I know that most people want to sell when their stocks are down and have a “let it ride” mentality when their stocks are reaching new 52 week highs. It’s always nice to see when your stocks perform much higher than indexes, but sometimes you need to know when to hold em’ and when to fold em’. You can never actually make any money in the stock market without selling some stock. When you are sitting on some nice gains without shaving some profits, this situation could turn into a disaster.
Apple keeps hitting new 52 week highs and it seems like they are still trucking for more. They still have their new operating system and the 2nd generation iPhones waiting to be released. I purchased the stock when it was floating around $100 a share. Now it’s floating around the high $160’s. That’s a 60% gain! Imagine your portfolio could get that every year. You would be the richest person alive in about 30 years. Unfortunately, that does not happen, but you can still take the profit and run. There is no shame in cutting and running once you struck gold with an investment. If your stock is up that high, why not take out your investment and let the gains ride. You have nothing to lose. You are playing with “house” money at that point. Remember that this strategy will only work if you have enough money in the actually stock. Trading fees can kill your return so make sure it’s worth selling. Try finding a broker that offers lower trading fees so nothing can disrupt the money you’ve earned.
You also need to realize that selling a stock that is down can sometimes save you tons of money or really cost you tons of money. The “street” can overact on some companies which can damage their share price very quickly. This is actually a great buying opportunity if you are involved in a company that has long-term commitments to profitability. For instance, Walgreen’s is a great company and the largest drugstore in the U.S. Because they didn’t meet the streets expectations, their stock price fell 8 points. Does this actually mean Walgreen’s will perform like crap forever? Probably not. There’s a reason why they are number one. They will learn from their mistakes and fix the issues that ended up hurting them this quarter. On the other hand, selling off a stock that falls because of the corporate structure, they are in mounds of debt, and other companies keep suing them for patent infringements could mean it’s just a bad company. That’s the story about Vonage. I learned my lesson about some risky company’s and you should always evaluate before you buy and sell stock.
