Be Far Better At Selling Than At Buying? - Revisit
My colleague told me he has problem in selling. When Market is up no heart to sell and when market is down how to sell? After 10 years in the market, still like that.
I told him I have no problem in selling and the reason is so simple. I have yearly profit target to meet while he doesn't have one. Profit can come from stock dividends or realized profit from selling stocks.
The profit target must be far above the total estimated stock dividends that can be collected in your portfolio to be effective in enforcing sell discipline.
So to be able to meet my yearly profit target, I will have to look hard at my portfolio and decide which ones to sell to realize profits and which ones to generate dividends. The unloved ones will be sold when market conditions still allow.
After selling some stocks, I will have to look again at the market to replenish the stock inventory for the next sell cycle. In this way, buy and sell cycles will come naturally as I need to meet profit target and sitting there doing nothing is not an option.
So when you really have problem in selling, try this cure - seriously set a yearly profit target for yourself and then make serious efforts to meet it.
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Hi,
ReplyDeleteTell your friend near Whitely road, there is a road by this funny name: "Tan Sin Boh Road"
When she or he learns not to, then naturally the selling problem will be solved.
It's a psychological barrier that is hard to overcome unless the person learn to put on a "trader hat".
ReplyDeleteDo you mean to do TA?
DeleteDo TA is just a part of it. More of trader's mindset e.g profit taking and stop loss points.
DeleteErrr ... shouldn't knowing when (or if) to sell be part of the Method? You know, like already having a clear framework of when & how to sell even before you buy into an investment.
ReplyDeleteMany many methods e.g. trailing stop, take profit levels, scaling out, valuations, change in fundamentals, TA indicators etc etc. Can base on a combination of them.
Of course mastery of the Mind is needed to implement the Method.
And the method or criteria to sell, cut, reduce etc can also be different based on speculation vs investment, time frame, objectives etc.
E.g. You may want to sell all or most of an investment if it has already met some short-term or mid-term objectives. Whereas for long-term objectives (like retirement) you may only want to sell 5% or 10% if it becomes overvalued based on backtested valuation metrics.
"When Market is up no heart to sell and when market is down how to sell?"
Hard to take profit or cut loss --- due to loss aversion (Mind).
Frankly, it'll be easier to just split his money into 50% Global or S&P500 index, and 50% into SSBs & SGS bonds. Once a year do re-balancing --- then he know when & what to buy or sell ... only 1 day each year. LOL!
Govts should automate the above for long-term pensions like CPF.