How to Nail Down Your Profits: 20 Questions for a Disciplined Approach
To be successful, an investment must not only be bought well, but also sold right.
Until sale occurs, the apparent outcome is merely a tentative, paper result. A handsome profit can wither at any moment (due to sudden bad news or a market meltdown) until it is actually nailed down.
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Properly, much attention is given to studying what to buy, but woefully inadequate energy is devoted to the hold/sell decision. Ironically this is backward, since dollars already invested are at more risk (and so deserve more attention) than cash not yet invested.
In this article, I’ll discuss how you can implement a discipline to your decisions on whether and when to sell. This is not the usual advice to use stop-loss orders or trim positions to restore intended allocation percentages. Rather, this approach focuses your plans for an exit strategy from the moment you enter a particular position—in an effort to overcome inertia and produce advantageous, coolly implemented exits.
Buying and holding reduces costs and taxes. But this approach assumes two critical points:
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