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Regardless of the type of investor you are, this is one of the single most important things you can learn. No matter what type of investment you are making, always have an exit plan!
Personally, I'm a long term value investor, and if I'm buying a stock or holding a stock that drops in price, I have no problem buying more to average down on my cost basis. If a stock makes my short watch list, it's because I have done my DD and have faith in the company and it's future, and I'm not about to sell over something as unimportant as a little volitility or general market foolishness. As Warren Buffett says "If you liked it enough to buy it at $10, you should love it at $5."
As part of my DD, I calculate a fair value for a stock, build in a 20% margin of safety, and buy at that price or lower. I always set a sell price, and will sell when it hits that level (or when the story changes), although in most cases, my stocks won't touch my sell levels for quite a while - sometimes years. I believe in concentration and care nothing for diversification just for the sake of diverisification. I reinvest all dividends and will add to my positions in small amounts on any weakness. A few hours per year of reading 10Q and 10K reports and reviewing and adjusting my valuation figures keeps me informed and up to date, and I rack up next to nothing in commissions or short term capital gains.
Know why you're buying a stock, and know when you will sell it. A changing story or an overvalued sell price that I can't refuse is what does it for me, but everyone has different critera - and only you will know when it's the right time to sell. But always know what your sell criteria is BEFORE you buy and then stick to the plan. The bottom line is that if you're doing it right, you shouldn't have to worry about your stock price ticking down a few notches.
i don't buy individual stocks for my serious investing ,only funds . i buy individual companies for speculating.
i have not bailed out of my funds in more than 25 years. i will change them to fit the big picture better and my goals but i never worry if they are down. i add money in good or bad markets . origonal money is up 1900% since i started .
Thanks everyone for you input and good points. bmw... Can you give an example of an exit plan?
Sure, some examples might be...
I base my exit strategies on moving averages, so if XYZ has been finding support along the 20 day moving average, I would only sell it if it falls below the 20 day moving average. Sometimes I will see a stock I like fall 50% in a matter of days and then start going up. If it fell from $100 to $50 and now it's $55, I might buy it and sell it as soon as it goes below $50. You might think XYZ will announce great earnings, in that case your exit strategy might be to sell it if earnings comes out bad.
I'm losing my shirt on Whole Foods (WFM). I keep saying I should sell but I don't. Each day it keeps going lower. Now its too low to sell.
How do you deal with this? I should have sold a month ago but didn't. Now I feel it would be too big a loss to sell (-30%). Went past resistance and keeps going lower. I feel I have no choice but to ride it out but each day wonder if I should buy some shares to cost average? I can't imagine the company is going under
I'm losing my shirt on Whole Foods (WFM). I keep saying I should sell but I don't. Each day it keeps going lower. Now its too low to sell.
How do you deal with this? I should have sold a month ago but didn't. Now I feel it would be too big a loss to sell (-30%). Went past resistance and keeps going lower. I feel I have no choice but to ride it out but each day wonder if I should buy some shares to cost average? I can't imagine the company is going under
If you had no position in WFM, would you want to buy it today? If the answer is "no," then there's no reason to hold on to it. Sell it, take the tax loss benefit, and use that money on something you like better. (Or hold on to the cash and wait for the right opportunity.)
What was the reason you BOUGHT the stock? Has that changed? If so, sell. If you believe your reason for buying it is still valid today, hold on.
"It's too low to sell" is not a legitimate reason to hold on to a position.
I'm losing my shirt on Whole Foods (WFM). I keep saying I should sell but I don't. Each day it keeps going lower. Now its too low to sell.
How do you deal with this? I should have sold a month ago but didn't. Now I feel it would be too big a loss to sell (-30%). Went past resistance and keeps going lower. I feel I have no choice but to ride it out but each day wonder if I should buy some shares to cost average? I can't imagine the company is going under
There is no such thing as "too low to sell."
As the previous poster mentioned, if you wouldn't buy it now, then you shouldn't keep it.
I use charts to buy and sell. WFM was a clear sell 4/2. It was finding support along the 20 day moving average. It closed below it on 3/25, attempted to break above it on 4/2, but found resistance and went back down. The 20 day moving average went from being a support level to a resistance level. There hasn't been any strong buy signals since.
I would not buy more to bring down your average price unless you think it's a good buy right now. If you didn't own it, would you buy shares now? If no, then definitely don't buy shares simply to lower your average price. I don't think the company is going under either, but that doesn't mean the stock price won't go down further.
If I owned WFM, I would sell it now because that is what the chart is telling me to do. However, make your own decision. It could very well start going back up tomorrow, but if it were my money or my friend's or family member's money, I would get rid of it.
I'm losing my shirt on Whole Foods. Should have sold a month ago. It has gone down so much (20%) I would lose too much now to sell. If it settled down I might buy but I'm too disturbed by the continuing spiral down.
Whole Foods CEO was on the tube yesterday and previous indicated the prognosis is not real promising.
Whole Foods Market on Tuesday cut its 2014 same-store sales and earnings forecast for the third time amid rising competition in the natural and organic grocery sector that it dominates, and shares tumbled almost 15 percent.
Austin, Texas-based Whole Foods also urged analysts and investors to lower expectations as it works to more aggressively lower prices and stay out in front of retailers such as Wal-Mart Stores, Trader Joe's, and Fresh Market.
Read More › America's iconic companies that disappeared
"We were overly optimistic ... particularly in light of the rapidly changing competitive landscape," John Mackey, Whole Foods' co-chief executive said on a conference call.
The above is from a month ago and your thoughts were right on target.
My "serious" portfolio only contains funds. I have a separate "play" portfolio that contains stocks that I bought partly because I believe in the companies and partly just to have something to talk about at parties. The only really volatile stock that I own is TSLA. I absolutely believe in the company's products and management, so whenever it drops, I buy a little more if I have some extra $$$ laying around. I'm in it for the long haul, so I see these dips as buying opportunities.
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