Forum Archive Index - June 2001

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Peter,

Great article and I think probably most of us saw our own reflection 
in the mirror at some point while reading it!

You are dead right about selling being the harder decision than 
buying too!

I use slightly different 'rules of thumb' to what you are suggesting.

I have a six monthly  and annual review.

I pay particular attention to my 'best' returns as it is surprising 
how often a share can get overhyped one year and tank the next!   I 
don't often sell at the peak mind you, but I do make sure that the 
good performance is at least possibly sustainable into the future.

My other rule of thumb, with no particular time frame on it, is that 
any company I buy into must have a realistic chance of improving 
profits to the extent of giving me a compounded 40% return (in share 
price appreciation and dividends) over the next business cycle.  If 
this doesn't seem likely, then I don't buy.   And if it gets there, I 
have a darn good look at selling out.   Circumstances may have 
changed to the extent that I choose not to sell out but I do at least 
make the sell/hold decision at that point.

On the rare occasion when I do choose to sell at a loss, I try to 
put that money into something else slightly cyclical that will at 
least give me a fighting chance of earning my capital back.  Putting 
you crystallized loss back into something that has a better chance of 
recovery than what you sold out from, I find, eases the pain of the 
loss.

I don't use a stop loss strategy as such, but I do buy in the 
knowledge that what I have bought may drop in value by 20% or so.
I think it is important to be able to handle this sort of paper loss 
(which is a real loss).  Usually I find things improve in due course 
if you did the right homework before the original purchase!

Anyone else got any other 'sell' rules of thumb they would like to 
share?

SNOOPY


---------------------------------
Message sent by Snoopy 
e-mail  tennyson@caverock.net.nz
on Pegasus Mail version 2.55
----------------------------------
"You can tell me I'm wrong twice, 
but that still only makes me wrong once."


----------------------------------------------------------------------------
http://www.sharechat.co.nz/          New Zealand's home for market investors
----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/forum.shtml.