Wednesday, February 15, 2012

Sit Tight

One of the common mistakes we make in investing is to not let our winners ride.

I guess this is because by and large, we (I mean us investors) are conditioned to take quick profits.

We tend to confuse action (i.e. buying and selling stocks) with results.

After we do that for a while, we later look back and wonder why we are not one of those people who hold multi-baggers.

There is of course a caveat to this.

The stock that you are sitting tight on, should be a stock which is fundamentally worth holding on forever.

When you have bought a stock which is going up, are you tempted to sell for 2% or 3% gain ?

One theory is that if you do that 12 times, you get 24% gain.

I would argue that is great for your brokerage, but maybe not for you.

I would advocate a sit tight approach when the markets are shooting up, like they are now.

There will come a time to sell.

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