Sound Sell Strategy Is Critical When Fully Invested In Stocks
Another valuable article I found was in the Investor’s Business Daily of Friday, March 8, 2013.
When an uptrend continues week after week, investors eventually become fully invested. In that situation, a sell strategy is critical.
Divide your portfolio into three groups by price progress: Losers, So-so Performers and True Winners.
Losers: Losers come in different shapes. If a stock is 7% to 8% under your purchase price, these should be sold immediately, no exceptions. If a stock is approaching the 7% to 8% loss, you need to ask why you are holding it. If a stock is lagging the S&P 500 (i.e., the RS line is falling), you need to ask why you are holding it.
So-so performers: If some stocks appear to be moving in line with the market and you need to raise money, these can be sell candidates.
True winners: This group should be subdivided into two parts:
• Stocks gaining 20% in the first two or three weeks after a breakout — this is the stock that you need to hold eight weeks and look for secondary buying opportunities.
• Stocks that, after a 20% to 25% gain, should be sold for the profit. Most stocks will begin consolidating after such a gain.
The overall goal is to divert money from weak performers to strong performers.