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View Full Version : Shares - Sell at profit or sell at loss?


Voodoo 3
17th May 2012, 07:30
So, judging by the title an obvious answer I would think, you sell at profit and you win. However I have a need to sell some shares at the moment. Some of them have done really very well (few k) but I'm not sure whether to sell those. They have continued to go up over the last few months so I think I should hang on to them in the hope their value continues to rise.

Some though have done badly, depressingly badly. Like a new Mercedes badly (many k). I'm thinking, do I hold onto them in the everlasting hope that they might spring back or do I cut my losses and reinvest them in another form, property for instance? Maybe sell some of each but again is there a method as to which to select or is a random selection as good away as any?

I know that everything that can go up can also come crashing down but here I now throw myself over to the collective wisdom of my fellow pruners.

Thanks everyone for their advice.:ok:

V3

Milo Minderbinder
17th May 2012, 07:57
you might get a more considered opinion if you told us which company the shares were in

UniFoxOs
17th May 2012, 08:04
do I cut my losses and reinvest them in another form

If, as you started off, you "need" to sell, I presume it is not for re-investment of your choice, therefore that decision does not apply.

Keep shares in companies that supply basics, food, drink, fuel etc., manufacture and distribution of same. These are nearly always safe. Sell shares in companies that are involved in non-essentials.

Hope that Ms Stockpicker reads your post and answers!


Cheers
UFO

mixture
17th May 2012, 08:12
Keep shares in companies that supply basics, food, drink, fuel etc., manufacture and distribution of same. These are nearly always safe. Sell shares in companies that are involved in non-essentials.

Yes dear. Great policy if you're 66 years old !

But one size does not fit all, and if you're somewhat younger, such a conservative policy is not necessarily going to be the best strategy as you are looking for different results from your investments.

mixture
17th May 2012, 08:18
Voodoo 3,

Sell at profit or sell at loss?

With all due respect, this is a fundamental concept of investing in the stock market.

The problem with investing is a lot of it depends on your personal circumstances and the nature of your investment portfolio. There is no one-size fits all answer, even to such a seemingly simple question.

For example :

Re: Selling at a profit....

Do you need the money ? Do you really want to sell your entire holding, or do you just want to "cream off" some of the profit ?

Re: Selling at a loss

Have you analysed the reason for the loss ? If its related to the state of the global economy and the company itself is still quite strong, then perhaps the depressed price of its shares presents a buying opportunity to top-up your holding ?

Can you afford to carry the loss ? If it doesn't mean a great deal to you, then leave it there for 6-12 months and then decide. If you can't afford to carry the loss, then cut your losses.


Remember, you make most money when you invest with a mid / long term view .... hunting profits and cutting losses on a short term view is only likely to yield a loss or meagre profits in the long term.


reinvest them in another form, property for instance

Suggest you lookup the definition of liquid and illiquid assets.

As was demonstrated back in 2007/2008 with the property crash .... using illiquid assets as an investment is only for the advanced investors who know what they are doing, and whose investment in illiquid assets constitutes only a tiny percentage of their overall investment portfolio.

You can sell shares on a whim. Good luck in selling property in a hurry when the market's not good !

Property also requires maintenance expenditure, and the need to find tenants. Shares only requires you to do your homework and pick good risks.

Worrals in the wilds
17th May 2012, 08:19
...or do I cut my losses and reinvest them in another form, property for instance?
Out of interest, how is the UK property market doing at the moment? Ours is quite jittery, particularly high end stuff and investor dominated markets such as beachside apartments.

Voodoo 3
17th May 2012, 08:38
[QUOTE]you might get a more considered opinion if you told us which company the shares were in[QUOTE]

Winners include BP and GlaxoSK
Losers include Xstrata and Lloyds Bank

Mixture,

I have had a majority for ten years plus and I just don't like seeing some of their performances resemble a ski slope and think it's better to cut n run and try something else. I don't want to sell everything, maybe 20% but just not sure whether to cream off what is good and bin off what has been a disaster! I can afford to keep the loss :{ but I just wonder, could it be doing better elsewhere. People have said one can't go wrong with property but then if you buy at the peak, when do you ever make on that.

I guess if we all knew what was going to win the 2.30, we'd put all our money on it and retire to the beach?!

Sprogget
17th May 2012, 08:46
People have said one can't go wrong with property but then if you buy at the peak, when do you ever make on that. But that's the point. Investing is a risk & taking the rough with the smooth is part of the deal for grown ups. Personally I still wish I'd piled in with more Gusto into BP in the wake of the gulf explosion. That did very well for me. Got my eye on Tesco for similar reasons.

mixture
17th May 2012, 08:55
People have said one can't go wrong with property

And where were you in 2007-2008 ? In a cave in Afghanistan with no comms ?

You can go wrong with property. Very, very wrong, and it's not very pretty either when it goes wrong if you're relying on the banks to finance your property goldmine.

You shouldn't be taking investment advice from people who make such statements. End of story.

Ace Brave
17th May 2012, 09:12
I have never really understood how, or especially why, people even consider asking such questions on a random web site populated by people you don't know and certainly you can have no idea what qualifications any of these people have.

Certain way to ensure that it all ends in tears. Go to a professional (or some professionals).

NZScion
17th May 2012, 09:12
You shouldn't be taking advice on the internet at all!

Suggest you find an adviser (base this on recommendations and track record), and pay a little to get proper advice.

Worrals in the wilds
17th May 2012, 09:20
Certain way to ensure that it all ends in tears. Go to a professional (or some professionals). Sure, but some of them have done their guts badly. One of the tribe took advice from a professional financial advisor who was also a friend and got into an investment scheme that did poorly. Very poorly. :ouch: Fortunately said relative didn't invest more than he could afford to lose, which is good; because he lost the lot.

Other people in the scheme ended up in a world of hurt, including the well meaning professional who'd recommended the scheme in the first place. He had a great track record, is a decent bloke and ticked all the boxes for sensible and well regarded advice. He had no personal incentive to suggest the scheme, but honestly believed it would do well. It didn't.

Brave new world. :(

mixture
17th May 2012, 09:20
I second the statements by Ace Brave and NZScion on getting good quality professional financial advice.

I was going to suggest it myself, but based on historical experience here on PPRuNe, there are many vocal voices here who incorrectly believe quality financial advice that is unbiased and customer-focused doesn't exist. Hence I did not bother stating the obvious, but good on you for doing so !


Fortunately said tribe member didn't invest more than he could afford to lose, which is good; because he lost the lot.

Investing is a risk. You should never invest more than you can afford to loose, irrespective of whose advice you are relying on or what you are investing in.

There is also a substantial difference in risk between an "investment scheme" and investing in the stockmarket !

Voodoo 3
17th May 2012, 09:43
Thanks Gents,

Of course one should always seek professional advice but truly is that always the best? On balance maybe so but I'm not going to arrange my affairs solely based on the replies of esteemed pruners I don't know but it's good to get a range of opinions and to test the water so to speak and to hear what others have to say. People have got stung on professional advice before, pyramid schemes anyone?, they weren't the first and certainly won't be the last.

Thanks all, V3

green granite
17th May 2012, 09:57
getting good quality professional financial advice.


Unfortunately the advice is often influenced by the quality of corporate hospitality.

If you are happy with high risk then, after some very very careful checking, consider investing in a Hedge Fund.
If you want a very safe investment consider the Gilt Market.

Ancient Observer
17th May 2012, 10:05
I don't do shares, having been burnt in the past. Our modest savings are all in cash, and earning whatever I can get as a dedicated rate tart.

However, one of the best bits of advice I received when I did do shares was to never invest in anything that I invested in.

The second bit of advice was to use "Stop-loss" and "bank gain" policies.
If you set your stop loss at 10% and your bank gain at 15% you should have a healthier portfolio. Lloyds and Xstrata should have gone.

After each sale, look again at the Companies as though you had never owned them.

BabyBear
17th May 2012, 10:12
Remember, you make most money when you invest with a mid / long term view .... hunting profits and cutting losses on a short term view is only likely to yield a loss or meagre profits in the long term.

I believe this wide spread belief to be flawed.

Of course one should always seek professional advice but truly is that always the best?

Absolutely not always the best, just consider some of the clangers the professionals have dropped in recent times; Fred Goodwin and more recently JP Morgan Chase, for example.

I was going to suggest it myself, but based on historical experience here on PPRuNe, there are many vocal voices here who incorrectly believe quality financial advice that is unbiased and customer-focused doesn't exist. Hence I did not bother stating the obvious, but good on you for doing so !

I don't believe the above is the case however it is difficult to find, more difficult to identify and even those giving it are merely expressing their opinion, albeit based on greater knowledge of the markets.

There is clearly pressure on all stocks at the moment due to the uncertainy with Greece and beyond. Banks and mining are particulary struggling at the moment due to European issues and a slowing of the Emerging Markets growth rates that has been largely responsible for the demand that has pushed the miners shares higher. Xstrata is involved in a bid situation with Glencore which is a further consideration.

BB

mixture
17th May 2012, 10:16
Unfortunately the advice is often influenced by the quality of corporate hospitality.


Don't tarnish everyone with the same brush.

I know a number of stockbrokers and financial advisers who don't get any corporate hospitality from those whole are looking for them to sell their shares, and that "number" is sufficient to back up my statement about not tarnishing.

Believe it or not, there are good, honest advisors out there who rely on the traditional model of giving advice.....i.e. understanding your client, their circumstances and attitude to risk, and then discussing the options openly and honestly with the client.

Keef
17th May 2012, 10:18
Some professional advisers are excellent, and will give you good reasoned advice that you can trust. Some seem to be into it for the biggest commission they can get. I've dealt with both, and don't know an easy way to tell which is which (until later). There are "rules", but they aren't all that effective (from what I've seen).

I do know that on average, the stock market goes up. Selling when it's down is not a good plan: that's the time to buy. If you have a share that continues to underperform versus the FTSE or whatever, then that's probably not a company to be in.

This free advice is worth what you paid for it (standard protection clause).

mixture
17th May 2012, 10:24
I've dealt with both, and don't know an easy way to tell which is which

Two starters for you :
(1) The size and type firm they work for. You don't want a multinational bank, and you don't want a small two man outfit either.... a mid-size firm (100/200 employees) that has been established for a good few years and not just since the late 80's / early 90's. Similarly, firms with the latest and greatest online trading platforms are to be looked at with caution as they'll have less customer-facing experience than those who rely on old-fashioned telephone advice and trading.

(2) Seniority. These are the guys who've seen it all before, the booms, the busts .... late 40's or 50/60 year bracket. There are good young ones about too, but you've got to be a bit more careful, especially if they're not working for an established firm.


But you as the client also have a role in establishing a good working relationship. You have to be open to new ideas, not have unreasonable expectations (i.e not expecting to make millions overnight just because you've employed the services of an advisor) and not assuming the advisor is just there to screw you and pocket commission. Treat others as you would like to be treated basically.

arcniz
17th May 2012, 10:26
One should have reasons for decisions that cause significant long-term personal impact. Financial information abounds, but consensus is hard to find, even among the well-informed.

Experience and access to current high-quality information are the keys to successful investment decisions. If one does not wish to be bothered with the effort required, perhaps getting out of the game altogether is the best choice - or selecting an alternative sort of investment vehicle that mixes together a soup of things selected by people who have a long record of adequate results and seem to know what they're doing.

Selecting a few large companies that have been around long while, have significant control in their business field, and consistently make a profit (barring the occasional unforeseen) plus pay a nice dividend -- that's in the nature of a safe choice, as much as anything can be. (BP is on MY good list, it is.)

This is probably the most complicated time for investment since WWI, but many conveniences now can really valueably help those who want to know... and need to know... about relevant facts, figures, histories, etc.

Remember that selling investments which have profits usually leads to paying taxes in greater or lesser amounts, while selling ones with losses normally does not.

Investing is a head game. Takes time. Not to be trifled with. Do it well or maybe do not put your resources where they are at risk. Living well and giving value to friends and family can sometimes be the best investments of all.

AlpineSkier
17th May 2012, 10:37
@ Worrals

One of the tribe took advice from a professional financial advisor who was also a friend and got into an investment scheme that did poorly. Very poorly. Fortunately said relative didn't invest more than he could afford to lose, which is good; because he lost the lot.


Would have to question this advisor's professionalism if he advised to invest everything in one scheme ( unless amount was rather small ). Some degree of diversification should be very thing the first thing to be agreed.

mixture
17th May 2012, 10:41
earning whatever I can get as a dedicated rate tart.

i.e. nothing.

As a basic rate tax payer you would need something paying 6% or as higher-rate you would need 8%.

Anything less than that and you're loosing money due to inflation.

Worrals in the wilds
17th May 2012, 10:57
Would have to question this advisor's professionalism if he advised to invest everything in one scheme ( unless amount was rather small ). Some degree of diversification should be very thing the first thing to be agreed. Of course, and said family member has other property based investments that have seen him through the losses.

However, pre GFC a lot of these so called professionals were hysterically touting investment schemes as the only way to get ahead.

If I had listened to the professionals five years ago I'd be considerably out of pocket. Instead I listened to my daggy aunts ('bricks and mortar, darl, inner city wood if you can afford it :\') and did okay. Consequently I have an inbuilt scepticism towards investment 'professionals' because to me, the whole investment industry is about as reliable and predictable as the racetrack.

green granite
17th May 2012, 11:04
Unfortunately the advice is often influenced by the quality of corporate hospitality. Don't tarnish everyone with the same brush.


mixture, you obviously do not understand the meaning of 'often', if I wanted to suggest they all were influenced in such a manner then I would have used the word 'always' instead of 'often'.

The biggest problem for the ordinary person of course is finding the good ones.

Slasher
17th May 2012, 11:14
Experience and access to current high-quality information are the keys to successful investment decisions.

And doing a hell of a lot of homework too. I can spend up to
20 hours a week buying/selling - or deciding to just keep the
status quo by researching the latest reliable info. Then there's
my stockbroker's rants* which I have to disseminate and look
at, as well as regular emails from fellow investors Stateside.

All that takes another 10 odd hours to do thoroughly - so on
average I look at about 30 hours per week on investments -
and even moreso this week with Greece's shenanigans.

* He owns 3 Ferraris and a big villa in South France so I can't
afford to ignore the bugger. Right now he says Greece is our
friend. With impulsive bond seekers fleeing to US$ I agree too!

AlpineSkier
17th May 2012, 11:35
Slash

Really surprised you can do all that, be a pilot and husband all well as frequent JB contributor and admirer of myriad females out there.


Putting together various comments you have made, I guess you are much more into bonds and currencies rather than equities - right ?

If so, are you a very frequent trader or more buy and hold ?

Andy_S
17th May 2012, 12:19
I have a need to sell some shares at the moment. Some of them have done really very well (few k) but I'm not sure whether to sell those. They have continued to go up over the last few months so I think I should hang on to them in the hope their value continues to rise.

Some though have done badly, depressingly badly. Like a new Mercedes badly (many k). I'm thinking, do I hold onto them in the everlasting hope that they might spring back or do I cut my losses and reinvest them in another form, property for instance?

I've been a private investor for over 10 years, and I've often had to ask myself the same questions.

There's a good rule of thumb that says if your investment doubles in value, sell half of it. That way you've recouped your original investment (if it all goes pear shaped) but still have an interest if the share continues to perform well. I also have my own additional rule of thumb which is that you shouldn't allow your portfolio to be overly weighted towards any share(s), so once a significant percentage of your portfolio value can be attributed to a particular share, sell enough of it to bring it's weighting back in line with the rest of your portfolio.

Selling underperforming shares is a much more difficult call. No one likes to make a loss, and it's so easy to kid yourself that if you hold on then it will be OK. Companies whose shares tumble unexpectedly or underperform the market normally do so for a reason, so be brutal, and ask yourself whether a) the reasons you purchased the shares in the first place have changed, and b) whether your reasoning was correct in the first place. Be honest with yourself and don't be afraid of admitting you made a mistake. Equally, if you're satisfied that the investment case is still valid and the company's fundamentals remain sound, then don't panic.

Squeegee Longtail
17th May 2012, 12:41
As a market maker back in the 80's/90's we were under strict instructions and limits for when to cut bad positions (often ignored by some though!!), even when you thought that things would turn back in your favour.
Back then, we were dealing in the very short term, and it was the bank's money.

Nowadays, I deal in a longer term and use my money, but I still apply the discipline of when to cut a bad position. It hurts to do this sometimes, but if left to your own judgement you will normally sell a profitable position earlier than you will cut a loss, thereby sustaining long term losses.

Be brave out there!

Slasher
17th May 2012, 14:10
I guess you are much more into bonds and currencies rather than equities - right ?

Equities yes (just in the last couple of months and then only
commodity stock) bonds DEFINITELY NOT. Forex yes.

Bullish on certain gold and gas stocks. Bearish on the Euro.

And yes it keeps me bloody busy alright. But having to be at
work is the main problem - and would be far worse if not for
an iPad.

And JB gives me a refreshing break from it and recuperates
my brain! :)

911slf
18th May 2012, 08:53
If the price falls by 30% after the highest point reached since you bought, then sell. You cannot lose more than 30% of your investment. If you cannot take a 30% loss on an investment do not make it in the first place.

If the shares did well for a while after you bought, then you will still have cleared a profit. Do not beat yourself up for not having sold at peak, or hang on in the hope prices will recover. I once bought shares that went up tenfold, and sold only when they came back to twice what I paid (could have been worse :)).

If you ever see the value of your shareholding shoot up so much that it is a scarily large percentage of your wealth, sell anyway.

I do not say this is the best way to invest but it is very simple and avoids the psychological 'rabbit in headlight' trap.

On buying shares. If share price is in pence or cents do not buy unless you fancy an outright gamble. If market capitalisation is already $100 billion do not buy. You have missed the boat. Yes I do have F***Book in mind.

If you are a well paid professional you will likely do better by working more hours than by playing the market (unless of course that is your profession).

My personal position. I have bought and sold shares, am neither rich nor broke. Good luck.

HuntandFish
18th May 2012, 15:41
if left to your own judgement you will normally sell a profitable position earlier than you will cut a loss, thereby sustaining long term losses.

A true statement Squeegee Longtail

BabyBear
18th May 2012, 16:04
if left to your own judgement you will normally sell a profitable position earlier than you will cut a loss

I agree the above is probably true

I don't agree the below necessarily follows

thereby sustaining long term losses.

BB

racedo
18th May 2012, 18:53
Always sell the share before it reaches its peak so that someone else can make a profit, sell when everyone is piling in.

Used to deal in shares and was in an investment club that did ok, even when was in a minority of 1 and outvoted to chuck 500 into a dodgy share which I promptly dubbed South Sea Bubble stock and it did as expected but we were in it together so it was fun down the pub.

Into property now so its where the cash goes, will pay back eventually.

A profit of 1 is still a profit.

And I still wonder where Slasher gets the time.