"When is it time to sell?" is a common question among novice investors. Some financial experts say that you should ride out the market for as long as possible, while others would advise you to get out if you need to move your money elsewhere. Those options may not be appropriate for everyone, so what should they do?
According to Motley Fool senior analyst, Jim Mueller, individual investors should review their previous sales to determine whether or not they were good decisions. Mueller reviewed three of his own sales and discussed the following lessons that he learned from them:
- Accept the outcome and move on – Mueller bought into discount grocer SUPERVALU in 2011 to take advantage of the company's turnaround effort. He sold after two years because the company did not seem to be making progress. After his sale, a late-minute rescue by an outside-investor sent prices up. He said that he didn't regret his decision to sell because he could not have foreseen the event.
- Don't get blinded by potential – A company may have an exciting or popular product, but if their overall bottom line is in the red, it may be time to get out. Mueller cited the pharmaceutical company Dendreon as his example. He first bought stock in the company two years ago after the release of a promising prostate cancer drug. The medication has not been marketed well and is not widely used, so Mueller sold his shares at a 70 percent loss.
- Be patient – Of the sales detailed, Mueller said that his disposal of stock from Oshkosh (the heavy-duty vehicle manufacturer) was his most regrettable decision. He let go of his shares 10 months after purchasing them at a 14 percent loss because several of the company's metrics, including sales, were disappointing. Oshkosh has since bounced back. Had Mueller held on to his Oshkosh stock, he would have had a 50 percent gain on his original position.
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Categories: Risk Management, Trading & Portfolio Strategies