shares, cashing in when high and reinvesting,or long-term

[pernickety]

i've followed lots of good advice here and have been investing in shares since last autumn, some individual shares and some funds. i've also been reading buffet's hold-long-term plan and intend to do just that.

however, i've watched shares fluctuate and wonder about selling when high regardless
e.g. one share has earned 350 euro profit since last november (after charges), if i cash this in and buy another share i think is good value, how could i be a loser? maybe this is a slippery slope but i don't think so. if i sell a share when i feel it's doing well (ok it could go on to do better but who knows?) aren't I just cashing in on the high? If i go on to buy a share that does badly, I'm not bothered cause I'm holding on for the long-term anyway.

 

[ClubMan]

Re: shares, cashing in when high and reinvestin,or long-term

if i cash this in and buy another share i think is good value, how could i be a loser?

If the new share falls by €350.

maybe this is a slippery slope but i don't think so. if i sell a share when i feel it's doing well (ok it could go on to do better but who knows?) aren't I just cashing in on the high? If i go on to buy a share that does badly, I'm not bothered cause I'm holding on for the long-term anyway.

Why not just cash in when you need the money and not as some sort of self churning exercise?

 

[euroDilbert]

Re: shares, cashing in when high and reinvestin,or long-term

Here's my view :

(a) Ignoring CGT, which may alter things and
(b) Taking buy/sell costs into account

then there is only one reason why anyone should consider selling one share to buy another - and that is do you think the new one will perform better than the one you're selling.

Other factors such as the amount of losses or gains on the share you're selling are irrelevant (though usually are a major factor in influencing people's actions).
Diversifying from one to multiple shares is a separate issue, but may be worthwhile.

 

[Murt10]

Re: shares, cashing in when high and reinvestin,or long-term

Have you any reason to believe that the shares you own will fall from their current price. What makes you think the new shares will rise in value.

There is an old maxim on the stockmarket "Let the trend be your friend". Hold your winners and sell your non performers. It's good advice, take heed of it.


Murt

 

[ClubMan]

Re: shares, cashing in when high and reinvestin,or long-term

Hold your winners and sell your non performers.

The problem is that many people apply this over the short term so end up consistently selling low and buying high.

Better, in my opinion, to diversify over a reasonable (according to your specific circumstances) range of asset classes, risk/reward profiles, geographic regions etc. and then hold them for the long term and sell when you need the money. Along the way you may need to perform some rebalancing but reacting to short term volatility is usually a recipe for disaster/losses.

 

[Murt10]

Re: shares, cashing in when high and reinvestin,or long-term

The problem is that many people apply this over the short term so end up consistently selling low and buying high.

Better, in my opinion, to diversify over a reasonable (according to your specific circumstances) range of asset classes, risk/reward profiles, geographic regions etc. and then hold them for the long term and sell when you need the money. Along the way you may need to perform some rebalancing but reacting to short term volatility is usually a recipe for disaster/losses.

I think that if the OP started trading in the autumn, and he's looking to cash some of his shares in now, that we can assume that he's a short term investor. There is no harm in taking a profit but that's not the same as cashing in winning shares, just because it is winning, to invest in other shares that may or may not perform as well.

I have learned from bitter experience that once a share starts to fall, and moves out of its normal trading range, that it will continue to fall and sticking with this share is a recipe for losing money.


Murt

 

[SlurrySlump]

Re: shares, cashing in when high and reinvestin,or long-term

The greed factor has lost me money in the past. If you are making a good profit there is no harm in taking profits at this stage. Just remember you don't have to immediately re invest the money, take your time, do some research. Always read the previous quarters trading statement and outlook for the current quarter on your chosen share. Keep an eye on the ex dividend dates as well.

 

[pernickety]

Re: shares, cashing in when high and reinvestin,or long-term

I think that if the OP started trading in the autumn, and he's looking to cash some of his shares in now, that we can assume that he's a short term investor.

She's not short term but just observing the fluctuations. i'm sure all the studies show that long-term is the best, yet i'm still watching and wondering. And i know since autumn is a VERY short time in the stock market, yet i've watched a fairly sharp fall this spring in japan, new york and around the world. my previous good earners dropped and dipped into the negative, my poor earners dropped further into the negative and i was losing money but i didn't cash in. now they're back where they were and higher.
i suppose i'm talking about long-term but taking out and putting in ONLY when i'm winning. if i own stock X that has earned me 350 euro and sell it and put the money back into stock Y, who's to say that it's a bad move? Perhaps X will continue to go up, perhaps it'll fall, same with Y, but I have taken 350 out and reinvested it, so i have more money invested. the money i put in originally will stay there long-term but not always on the same shares.
If i ONLY sell when i'm winning, and am ready to hold on long-term to the losers, am i losing?

 

[ClubMan]

Re: shares, cashing in when high and reinvestin,or long-term

i suppose i'm talking about long-term but taking out and putting in ONLY when i'm winning.

Few if any people can consistently pick winners and beat the market average. Buffet et. al. are probably one of the exceptions but if you read his reports you will see that they do an awful lot of research/analysis before investing, tend to buy whole companies and run them for the long term in close cooperation with the management, and they do sometimes pick duds. Few individual retail investors would be in a similar position as Buffet/BH etc.

if i own stock X that has earned me 350 euro and sell it and put the money back into stock Y, who's to say that it's a bad move?

Nobody because nobody can predict the future. It's only a good, bad or indifferent move in retrospect.

If i ONLY sell when i'm winning, and am ready to hold on long-term to the losers, am i losing?

If you have a failsafe formula for always only making gains then well done. But I doubt it.

 

[pernickety]

Re: shares, cashing in when high and reinvestin,or long-term

If you have a failsafe formula for always only making gains then well done. But I doubt it.

no not a failsafe for only making gains, but the idea that WHEN any of my companies DO make gains, then I may cash in. not always, but for example a company i believe is high risk and happens to be doing well now? Of course it depends what i go on to buy i know.

i suppose the bottom line is that i'll probably have to learn the hard way

 

[ClubMan]

Re: shares, cashing in when high and reinvestin,or long-term

Of course it depends what i go on to buy i know.

Don't forget to factor in the cost of disposal and acquisition expenses (including stamp duty) and the need to record CGT issues each time you trade.