Common Stock Portfolio Management Mistakes

Common Stock Portfolio Management Mistakes

Forgetting about Sold Stocks

There may be times when you think you have spotted a stock with strong fundamental and technical characteristics, but the stock doesn’t act right after its breakout, and so you are forced to sell. Don’t completely forget about that stock. There’s a chance you were just early in your timing or the general market conditions weren’t right. Keep the stock on your radar. If the stock breaks out again from a proper base, don’t be afraid to buy it back.

Not Wanting to Take a Loss

Many investors will refuse to sell a stock that is down because that would mean “admitting” they were wrong in the first place. If you’re down on a stock, you already have a loss. Holding on doesn’t change anything. We recommend cutting losses at 7% to 8% below your purchase price. In many cases, your capital will serve you better allocated to another stock with a stronger likelihood to advance.

Ignoring Sell Signals

Selling right is as important as buying right. It’s easy to get attached to a stock that has advanced a lot from your purchase price. You might really like the company story and the fundamentals may still look fabulous. If you ignore signs that a stock is topping, however, you may watch your hard earned gains evaporate. Remove emotion from the equation. Employ a rule-based system to help spot when a stock is topping.