There’s a special moment in every investor’s career that you’ll experience when you first realise you’ve picked a winner. You stock has risen in value – it’s doing really well. So, what’s your instinct? Should you sell it and make a tidy profit, knowing that you could end up kicking yourself if its value continues to rise? Or should you hold onto it, knowing how frustrated you’ll feel if its value starts to fall again? There’s no simple answer to this. The best approach for you to take will depend on what you want to achieve.
Horses for courses
When people talk about riding winners, they’re really talking about the value of holding onto investments for those people who can afford to do so. That’s all well and good if you’re saving for retirement. It’s less useful if you’re trying to raise the funds to buy a house or start a business in the near future. In the later situation, there’s nothing to be ashamed of about trying to make a quick buck. Investment isn’t just about saving and avoiding risk – it’s about maintaining the flexibility to take advantage of fresh opportunities when they present themselves.
Buy and hold
if you do want to focus on building up your long-term assets, buying and holding stocks for five years or more is generally a sound strategy. With a sufficiently diverse portfolio – giving you some insurance against individual companies that you’ve invested in experiencing problems – it’s difficult to lose money like this. If your assets fail to increase in value above the rate of inflation, however, you won’t gain anything either. So, whilst this is a good strategy for securing your future, unless you get lucky and happen to buy into the next big thing, it’s unlikely to make you rich. To have a shot at that, you’ll need to pursue a more active investment strategy.
Picking the right point at which to sell your winners is something that takes a bit of practice. As you get used to observing market trends, you’ll find it easier to do, but in the meantime, it really doesn’t hurt to sell when things are going well – you might not make as much as you could have done, but you’ll still have made a gain and, importantly, avoided a loss. Find a broker who can offer you high quality weekly stock tips and let those guide you as you decide when to buy and sell. In addition to this, you can improve your ability to predict the performance of specific assets by thoroughly researching the company you’ve invested in and the other business decisions being made by the directors.
In an ideal world, you’ll sell your stocks when they reach peak price. In the real world, if you’re pushing to get all you can, you’re more likely to end up selling them just after the price has started to fall again. Either way, you’ve made a profit, and you can celebrate having made the right investment choice.