Taking Profits Strategy

Andrew365

Registered User
Messages
65
Hi,

I have mostly invested passively in broad sector based ETFs with a general 20 yr+ investment horizon from around 2010. I have invested consistently on a monthly basis not worrying about market timing and given we have been in a bull market the strategy has not needed much if any attention and with the advent of robo-advisors it takes even less effort now given they offer portfolio rebalancing etc.

I have over the years however dabbled in individual stocks but what I have struggled with it having a firm strategy on when to take profits. The problem I have is when I pick a stock I don't set a price target and timeline and have generally been applying the same timeline i.e. buy the stock because I believe it will rise but haven't set exit strategies.

Do people have any simple strategies? I am thinking along the lines of setting a timeline for investment, a price target and then if for example price increases by 20% I take the 20% profit out and invest elsewhere. I want to try and remove the emotion from it and be stricter.

Any suggestions and tips are greatly appreciated.
 

Colm Fagan

Frequent Poster
Messages
268
Do people have any simple strategies? I am thinking along the lines of setting a timeline for investment, a price target and then if for example price increases by 20% I take the 20% profit out and invest elsewhere. I want to try and remove the emotion from it and be stricter.
I am with Warren Buffett, who says that his ideal holding period is forever. That should be clear from my investment diary (which can now be accessed readily on www.colmfagan.ie as well as on this website). Obviously, I sell if I decide that I misjudged a company's prospects. I consider a sale as an admission of having made a mistake. The diary shows many such incidences (e.g. Samsonite, WPP, both of which I disposed of relatively quickly), but there are many others that I have held for a long time and which I (currently) have no intention of selling (e.g. Phoenix Group Holdings). For some of my other holdings, I don't have strong feelings either way. For example, even though I've held Renishaw for more than 20 years, I'm not that enamoured about its future prospects. I think it will do OK, but won't put the lights out. I'm reluctant to sell because of the CGT implications.
 

cremeegg

Frequent Poster
Messages
2,798
If you are stock picking, it is a very good idea to write down your reasons for purchasing.

When those reasons no longer apply, sell.

A simple example would be a company bought for its dividend yield exceeding the market.

If its share price rises to bring the dividend into line, then the original reason for purchasing no longer exists. If the dividend falls ditto.
 
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