Hey long time reader not often i post as i feel im still in the very beginning of my share journey. As the title reads how do you know when to take some profit?
I invest in a few shares and in for the long haul but often i feel a share that im invested in sometime stagnates and then will dip and often wonder if i should have taken a slice of profit to reinvest in a dip. On the flipside i think what if it keeps going up and then i miss out on some growth so should i just leave it.
Any thoughts or advice greatly appreciated.
Cheers
When should you take some profit?
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15-04-2020, 08:35 AMsmileyWhen should you take some profit?
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15-04-2020, 09:54 AMSnoopyGreat question Smiley, and the answer is 'it depends'. I am thinking you might want a more definitive answer than that though.Quote:
Originally Posted by smiley
To answer this question you have to go back one step and ask:
"What is my investment objective?"
If your objective has a definite "cashing in" date, for example:
"I want to withdraw from my kiwisaver because in June 2021, because I want to get my deposit to buy my first house."
then you would want to start withdrawing from any sharemarket linked investments a year before that. If I was doing it I would mentally split my growth fund balance into three. Then I would transfer 1/3 of my balance into a conservative fund in June 2020, another third in December 2020 and the last third in June 2021. That way you don't get caught having to pull all of your house deposit money out of growth funds on one date. It is much easier to say this than do this, so real discipline is needed.
However if your 'cashing up date' is a bit more nebulous, for example:
"I want to build up a good sharemarket nest egg to ease me through my retirement."
then you may not even have a cash up date. You might want to plug into an indefinite stream of good dividends instead.
I am sensing that an underlying mind state behind your question is FOMO or 'Fear of Missing Out'. Formal studies have shown that it is very difficult for even professional active fund managers to 'beat the market' over the long term. There is a tendency in forums like this for people to 'crow about their successes'. However when it comes to the subject of losses most of those crowers go very quiet. I guess what I am saying here is that by having a set and forget portfolio, you are not necessarily underperforming in a way that constantly reading about others 'success' on here might make you think.
Unless you are willing to put in a lot of your own time into deeply researching investments, I would suggest that if putting together a nest egg for retirement is your goal, you aren't far off an optimal strategy doing what you do now.
SNOOPY -
15-04-2020, 01:55 PMmacduffy
For the most part it's one of those unanswerable questions, smiley, second only to "what is the meaning of life?"
The nearest I can get is, as Snoopy says, "It depends".
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15-04-2020, 06:09 PMsmiley
Cheers for the replies guys. My portfolio has no cash in end date (im in my late 20s and already have a house and this is for my retirement in a few decades). Think your right about the FOMO i had thought it might be this but thought i might also be missing something.
Ill just carry on leaving it be and investing more into the market in the same manner i have been.
Cheers -
15-04-2020, 09:00 PMSBQYeh I can't think of anyone that is not needing the $, to consider cashing up for a bit of profit taking. The hyperactive game of trying to time when to buy and sell is purely on luck. If you have 40 years before retirement, I would put as much as you can right now into the sharemarket. Historically over a long term investment time frame, NO ONE has regretted buying during a bear market crash.Quote:
Originally Posted by smiley
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15-04-2020, 11:08 PMJoshuatree
Just to refineSBQ's advice a little.If you are determined to take the risk and get in now,average in over time say once a week or month.Im only occasionally nibbling or adding to quality stocks.I think we have alot more pain to come, so implore you to average in over time and smoothe out your average price. Its pretty horrible seeing your investments halve because you timed it wrong and if something drops by say 50% it takes 100% gain to get back to where you were.
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16-04-2020, 01:05 AMpeatFirstly let me make it clear that I don't disagree with the other posters in this thread who have answered your question even if it wasn't exactly a definitive answer I agree with their logic regarding goals and timeframes.Quote:
Originally Posted by smiley
However it is arguable that one may wish to skim the top as I call it and (despite all the good advice) attempt to improve ones returns.
i think there is a general consensus one never takes profit on FPH or MFT , possible EBO.One can look at technical indicators such as RSI (Relative Strength Index) which attempt to clarify periods when a stock is overbought or oversold.
But if one would try to skim cream off shareholdings by selling out at points of price exuberance there are ways to structure it.
However my experience is they often give early signals which induce profit taking too soon and price continues on up.
For long term investors it is probably better to work the other way and structure the buying around times when a quality stock is oversold
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16-04-2020, 08:25 AMSnoopyI have given you a general answer, but now I am going to tell you what I do myself. I am in the camp of not having a definite cash up date, but I am rather closer to retirement than you are. That means I am more risk averse with my share investments than some, and I tend to gravitate towards utility based investments and investments that satisfy daily needs such as those in the food industry.Quote:
Originally Posted by smiley
My framework for investing in the NZX is to have a portfolio of 12 separately listed investments. I am a bit less diversified than that figure implies because I like to invest in 'pairs'. For example my paired investment in the power industry consists of Contact Energy and Mercury Energy. By investing like this I am 'forced' to read both annual reports, and that gives me two different perspectives on they same industry. This I believe helps me to be less 'tunnel visioned' in my views, so I do not automatically follow 'one company management think'. Furthermore by looking at differences in reporting, I can formulate questions to myself on why one company does things one way and the other a slightly different way. I find this way of looking at things insightful. So how does this tie in with the question of buying and selling?
I have a loose target on how large or small I want any one of my investments to be. So if I want to add to my 'power industry balance', I will tend to invest in the company in which I have the least money invested. That is likely to be after a company has had or is expecting a 'bad' year. (I should mention here that the investment performance of these two gentailers depend on how will filled their respective water catchments are, and the respective catchment levels are more often than not negatively correlated). So I end up buying after a bad year when the share price is lower. Likewise if I wanted to sell (hasn't happened yet with these two) I would pull money off the top of the higher valued investment. This works for me because gentailers with a heavy renewable footprint tend to have cyclical earnings over the medium term. So buying low, whatever the share price trend is doing, tends to work out well because I tend to hold these types of investments through market cycles.
Another criterion I have for investment is that I require a minimum gross yield to be paid over the business cycle. This criterion has kept me out of adding to my gentailer portfolio at all over the last couple of years.
It also steers me towards buying at a lower price.
If you were investing in a high growth industry, you might follow a different strategy.
Investing this way suits my own investment space, which isn't the same as saying I think everybody should do as I do.
SNOOPY -
16-04-2020, 09:54 PMSBQI was told by financial advisors in the past that if you're investing for the long term like over 2 decades, then it does not matter when you buy the shares. What a bunch of waffle! Timing and how you buy in tranches does matter. However that's not how investment schemes like Kiwi Saver operate. They have a steady cash flow coming in for as long as the person is employed. How come i'm seeing little news about the probability of high unemployment in NZ (like 15 or 20%) and what impact that would have to managed funds in NZ? Because if you ask me, the time to invest is right now and in the near short term future. But those who are not employed can only watch this opportunity sail by which is sad...Quote:
Originally Posted by Joshuatree
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18-04-2020, 10:23 AMsmplCouldn't agree with you more!Quote:
Originally Posted by SBQ
Although I don't agree with this for the stock market :-)Quote:
Originally Posted by SBQ
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18-04-2020, 11:14 AMSaameeQuote:
Originally Posted by smpl
Also try Independent Reserve ( lowest fees - as low as 0.05% )
>> https://www.independentreserve.com/ << -
18-04-2020, 06:48 PMValuegrowth
How value investors buy and sell stocks
https://www.valuespreadsheet.com/whe...uy-sell-stocks
When to sell growth stocks?
When they stop growing or growth begins to slow, it might be the best time to sell. It is also better to sell When they over extended.
Exception: Multibagger stocks (companies) with strong balance sheets. Never sell them unless for an emergency. -
15-06-2020, 07:58 PMjr1973
Whats your lifestyle objective. We as humans are perpetually greedy so there is no "when should I" it is merely a case of what kind of lifestyle do I want. Oversea's holiday for the family business class to Europe skiiing is a different proposition to "an annual holiday to Kosomui economy class for the family at 5 star resort". What kind of car do you want to drive? Assume you replace it every three years? Masarati? Toyota Hilux? Kia Carnaval? Where do you want to live? Beach side, 15 minutes from the beach on an acreage, in a major city? All these considerations have a big impact on what cash you need and when. Here's a tip... NO ONE does this level of analysis yet they spend a lot of time trying to out perform the market. Get clear on what YOU want from a lifestyle. I know a number of wealthy business execs that dropped dead trying to beat their mate up a hill on a push bike... none of the dreams came true... including beating their mate. Answer those questions and then the answer is easy... take what I need when I need it regardless of what the market is doing. Don't be greedy and you will be fine.