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02-14-2013, 02:53 PM | #1 | ||
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02-14-2013, 03:16 PM | #2 | |
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I buy 50 shares of a stock at $100 for $5,000. It goes up 20% to $120 and $6,000. I sell 42 shares at $120 to get my $5,040 back (roughly), and still have 8 shares that are worth $960. I then let those 8 shares ride. If I report a 30% gain, it's 30% over what I originally paid, or $130. So at a 30% gain, those 8 shares are worth $1,040. And of course there are some sale fees and stuff. I've doubled down on a few stocks. Because I've held most of them for a while, I get a feel for when they seem to be priced low. I did great on the stock for a financial services firm after the crash because I only had my profit in it, so it didn't destroy me when that $1,000 lost 90% of it's value. I looked at the company and it was still doing well, so I bought it three more times on the rebound back up. I've also bought Carnival when it tanked after the Costa ship problem. I already had the stock, so it seemed like it got hit too hard. I've done it with a couple of other stocks that way too, when they got bad news. The only double-down I've whiffed on was General Electric. I initially bought it and it tanked 20% and I doubled down, but I didn't know the stock well enough. It then dropped another 20% and has been vexing me ever since. I should note too that a key part of my strategy is to get dividend-paying stocks, too. If I do that, I see three outcomes: 1. The stock goes up 20% and I implement my system. 2. The stock is stagnant, in which case I still get a 2 or 3 percent return. 3. The stock tanks, in which case I'm hosed anyway, but the dividend at least helps me slowly recover my losses.
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I'm putting random letters here as a celebration of free speech: xigrakgrah misorojeq rkemeseit. |
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02-14-2013, 04:08 PM | #3 | |
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You're not the only one on GE, and you're talking to a guy who has bought into MAYBE 12 or so different individual stocks in his life. I'm starting to do more now, though, just because. Slow and steady wins the race, but it is damn boring. I'm finally at a point where I"m comfortable making fairly small plays on my own, so sure. But yes, GE was one of my early ones, and it has been a problem for a while. It's finally gotten to the plus side of the ledger, however, thank goodness. I'm terrible at selling, so I'm probably going to implement your system, or a variant of it. I watched Alcoa go waaay up and then come all the way back down to negative. I think I was up 100% at one point, but now I'm at +3%. Your system seems like the kind of thing I need to enforce some kind of discipline on myself. Otherwise, I tend to buy and hold forever. But I'm never going to hold onto shares that are up 20% after a merger/acquisition is announced.
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02-14-2013, 04:19 PM | #4 | |
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The other side of my equation was that, in an Alcoa type of situation, I would buy back the original shares if the price dropped back down to the original purchase price. I haven't had the discipline to do that yet because I've always found another shiny stock beforehand, but in theory it seems like it should work. Ride the stock up, sell the original investment amount high, and then just invest it right back if it goes back down. If it keeps going up you still get a little piece of the action with the profit that you've left in it. The model only seems to break down when you buy GE and it gets on a train south and never comes back.
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02-14-2013, 04:44 PM | #5 | |
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Well, I've implemented your plan already. I had Pfizer bought at $17 and it's at $27, or up 55% or so, and I'd arbitrarily decided to sell at $30/share, which it's been slowing climbing toward for awhile. Instead, I have now sold 2/3rds of my shares, which is enough to get my initial investment back, and am holding onto the 1/3rd as a profit play. Your take the money off teh table approach makes sense. Of course, lately it hasn't been too tough to get a 20% gain on anything if you were buying anytime after the '08 crash... In a bear market, finding somethimg to go up 20% is a helluva lot harder.
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02-14-2013, 04:49 PM | #6 | |
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Let me know how it works for you.
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I'm putting random letters here as a celebration of free speech: xigrakgrah misorojeq rkemeseit. Last edited by Rain Man; 02-14-2013 at 04:59 PM.. |
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