If you are into investing with shares, you would have came across or learned about the above three phrases:
– Buy And Hold
– Buy And Sell
– Sell And Take Loss
I am not a Professional Stock Investor and I have not really made Thousands out from my investments. But I am starting to understand the significance of the above three phrases through my personal in a negative manner and I wish to share what I know about them with this post.
If you are just starting to go into shares, you may wish to take note of them and I hope this can be useful to you!
1. Sell And Take Loss
You can have a good laugh at this. When I first got into shares in 2008, all I knew was Demand vs Supply and the impact of Inflation that will drive up the share prices. These are the two schools of knowledge that I apply to buying of my shares.
So I bought into a Stock that’s around $0.25 for 10 lots (10,000 shares). That’s a total of $2,500 not inclusive of the charges. The economy did not turn well for this company and the shares started to go downhill. And there’s no sign of it going up again.
When the share prices dropped by the 10 – 15% range. My friends recommended me to sell them and take loss. Being a sore loser by then, I did not give in and told them off that with time and Inflation, the share price will naturally go up!
Long story short, that company’s overall business did not improve. Shares dropped to the current range of $0.025. My current loss is at $2,000+ range. I am still holding onto it, because I do not need the money (which I may still be silly) and really hoping that the situation will have a turnaround (another silly thinking) and I can sell them off to minimize the loss.
Lessons To Learn From This:
- There’s no winning stocks every time. Shares go up and down depending mostly on the economy and the management behind the company and not just because of demand and supply and inflation.
- If your stock buy is experiencing a loss and there’s no sign of it going up again because of many factors like the annual reports have been bad – learn to sell and take loss. It’s painful but you can take this money and invest in other shares that will give you better returns and cover your initial loss.
- Set a benchmark for your stop losses. Some people recommend a loss of 10% to the maximum of 20%. Once you have this, follow through and apply to your investments.
2. Buy And Sell
There’s a IPO that I have gotten in at $1.96, and it’s quite a popular share. And I think there’s quite a fair bit of buying frenzy that drove the share price to around $2.60+ range. The gain is around 30%.
My other friends, who have bought this share, have sold it at the range of $2.60 to enjoy the 30% capital gain which I did not – believing that I have locked in the profit (and that it will not fall below my purchasing price) and that the share price will go higher and higher.
It did go up the next few days that’s slightly higher than the $2.60+ range but in recent days because of the chaos in some countries – the share price is $1.89. Lower than the initial buying price of $1.96.
My Friends got back in at this new price and have confidence that it will go up again! For them, it’s a double gain but for me, it’s still a loss.
Lessons To Learn From This:
- You may wish to set a Capital Gain Percentage when you go into buying. As mentioned, nothing is predictable in the stock market and it’s always good to lock in and cash out the profit. You may say that there’s possibility of it going up further but there’s also a possibility of it going downwards as well.
- Continuing from above, even if you have cashed out at the wrong time and the stock went up higher – just enjoy that you have made some profits at that moment, the most is move on to other share counters. If you believe in that counter, just keep a lookout, the economy may just push the prices down again in the future and you can go in for another kill.
3. Buy And Hold
I believe I am someone who likes to apply this principle to most of my stocks but apparently this is not effective for someone like me who is not experienced!
But from what I have understood from most stock investors (not speculators), is that this principle holds well when you understand the stock well. Some may call these kind of stocks – Blue Chips, stocks that have withstand against time and the economy to be where they are now.
Blue Chips may cost more than most stocks but there’s earning potentials from capital gains and dividends earnings in the long term and people buy these stocks for their Retirement Planning.
Lessons To Learn From This:
- There’s a good reason why you need to educate yourself when you buy stocks – so that you can identify which are the good stocks to go into and that you can apply the Buy-And-Hold principle.
- Once you have identified them, you can always apply the principle of Value Investing to enhance your investment portfolio.
Conclusion
There are many learning factors and principles to consider when you are going into investing stocks. You can easily make money fast or lose money faster through buying of stocks, that’s why you have these principles (like the above three) to guide you along.
Therefore do educate yourself when you are investing into shares. Good education will help you to make better choices and to make sure that you can make more money from shares.
