General Profit Taking Advise

I have been asked and have had some good discussions with a few people regarding when is the appropriate time to do some profit taking on a ‘hot’ stock?

The short answer… profit taking is never a bad thing to do. With that said, the best advice I have come across is from the Casey Research team.

Q. If you are buying low, when is it that you should sell high?

First and foremost, if you don’t sell, it isn’t a profit.

Q. But should you sell? Or, now that the golden bull is running hard, hold on?

Money you can afford to lose half of, and you are invested in quality stocks that you understand, then hanging on for the full ride is probably the way to go. If you are invested in the junior resource sector with money you really can’t afford to lose, you can and probably should regularly rebalance your portfolio, pulling cash off the table as you do, in order to keep a constant amount of money in the market. If you are looking to break your personal poverty and get rich by leaving all your chips on the table, it is hard to argue with that strategy either… though refer again to the first point above; it’s not a profit until you actually sell. You have to be willing to accept the risk. If you are not, then don’t forget to periodically sell enough to diversity you portfolio.

Personally I find getting caught up in daily trends exciting but kind of ridiculous. If by using all the current news and all your DD you believe the future value is greater then the present value (which I do), then buying and selling short term can be more like playing roulette. Use the rules above to manage your own risk. Everyone has different risk tolerance and various financial agendas. Take profits when it is right for you. But be careful not to make decisions based on emotions.