Saturday, November 7, 2009

Don't Forget to Take Profits

We would be remiss if we didn't remind you to take profits. Now, we could just remind you that you need to be listening to our Lunch @ the Markets Segments (You can listen to them here: and leave you in the dark, but we'll let you in on our market discipline (not that we are the only one's in this school of thought).

When the markets roar, no doubt you will make money if you're long good stocks. I guess you could lose money if you owned $RIMM (Research in Motion) or $MYGN (if you bought it @ $30 because you listed to us late after we told you to buy it under $25). But, for most people, especially if you've been in the market since March, or even April, or May, or June, and especially July (because so much of it was spent in the red). Then you have made money. Please, don't let all that ride. Do not be a pig.

When we were in California, we had one of the advisers we work with come back and tell us a story about a client of theirs who had refused to sell $GE @ $17 and $WFC @ $31. When confronted with the brutal facts that $GE fell $3/share and $WFC fell $4/share; they said that the companies were good solid companies and they'll come back. That's true, the probably will, and in 5 years those prices might sound low. But that is not the case right now, and the bottom line is. If you're up big, even if you like the stock, you have to sell when you're up...especially if you're up big. Why not take some off the top and then, if you like it so much, buy it back after it pulls back. Nearly every stock pulls back. People didn't think Goldman Sachs ($GS) would pull back...and now you can pick it up for $171.90! That's down $20/share from the 52-week high!

Look, the bottom line: "You cannot own stocks forever." That's one of our favorite quotes from the advisor we talked with in CA. Can you imagine if you bought $GE @ $8 in the early 1990s and watch it go up over $40/share...and then DIDN'T sell it and watched it fall all the way back down to $8!?!? Don't put yourself on that type of roller coaster, and don't own stocks forever. Very few companies should be owned forever. When you have big gains...take some off at the top, or on the way up (because know one knows exactly where the top...or the bottom is for that matter). You'll have plenty of cash on hand for when the market has a rainy day and dumps a stock you like big time. That will be your cue to come in and buy. We've had a lot of fun with $STJ down 10% in one day, $TRLG down 20% in one day. You'll have to go listen to our Lunch @ the Market Segments ( for all our research. We work hard, but we're not going to make it that easy for you every time. :-)

We'll tell you the bottom line, because that's the way we like to shoot it, nice and straight: ALWAYS keep cash in your portfolio for rainy days, try to avoid ever buying on an up day, and please don't sell on a down day. Instead, when markets are up big...look for things you can sell. When they're down big, look for things to buy. To avoid being emotional, keep a shopping list around for these days and keep sell price targets. Heck, go ahead and enter in the limit orders to sell ahead of time so that you take the emotions out. Know what you own, and always do your homework!

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