Understanding the Sell Side

Never mind when or what to buy. Do you know when to sell?

Knowing when to sell a stock or bond out of your portfolio is critical to managing your money. But most people don’t think about it very much. They figure that if you own the right stocks, the rest will take care of itself. A quick survey of the literature comes up empty. And when did you ever see the financial press feature “Stocks to sell in the next year?” But few people have a “forever” investment horizon. Buying a stock ultimately means selling it, sooner or later.

There are as many approaches as there are investment styles: sell the stock when it reaches a price target; set a trailing “stop loss” signal 15% below the stock’s high price; hold the stock as long as its fundamental value continues to rise, rebalancing occasionally; sell when the stock becomes too volatile. The critical issue is to have a plan and stick to it.

The problem is, most of us fall in love with the things we own. People who bet on horses almost always raise the chances of their horse winning once they place the bet. Folks who might value Super Bowl tickets at $500, if given those tickets, wouldn’t sell them for less than $1000. And once people own a stock they invent all kinds of reasons to keep holding it, even if the original premise for buying it is no longer valid.

Selling a stock—especially one that’s fallen—is hard. It invokes feelings of regret and failure that most of us would rather not face. But mistakes are inevitable in life. It’s only as we face them that our portfolios can advance, and that we can grow as people.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By |2014-09-11T12:27:08+00:00April 13th, 2011|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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