AAII Journal > May 2009
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How to Set and Revise Realistic Price Targets for Your Stocks

by Donald Cassidy

How To Set And Revise Realistic Price Targets For Your Stocks Splash image

An investor over time attaches some validity to his or her initial price objective, meaning that modifying that expectation becomes difficult for reasons totally contained only between one’s ears.

But stocks go where they want to, despite what any participants think is justified and despite what investors might wish would happen. Investors unable or unwilling to let go of original price opinions are doomed to lose, either through losses in positions that never come back, and/or from better opportunities elsewhere that have been lost.

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About the author

Donald Cassidy was senior research analyst for Lipper Inc., a Reuters Co., from 1990 to 2006. He recently founded the Retirement Investing Institute, a nonprofit educational foundation, and is the author of five books on personal investing, including “It’s When You Sell That Counts” (now in its third edition). Contact the author at don@R-I-I.org.
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There are two primary ways that investors get into trouble when setting price objectives:

  • The initial idea, including the selling-price objective, may have been wrong from the start.
  • If correct at first, the original idea can become outdated and, therefore, inaccurate as subsequent events transpire.

How, then, does one develop a realistic price target?

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→ Donald Cassidy was senior research analyst for Lipper Inc., a Reuters Co., from 1990 to 2006. He recently founded the Retirement Investing Institute, a nonprofit educational foundation, and is the author of five books on personal investing, including “It’s When You Sell That Counts” (now in its third edition). Contact the author at don@R-I-I.org.

Discussion

Mr. Cassidy, thank you for writing this great article with a well anchored perspective. It's so easy to get caught up in the momentum and unrealistic expectations, forgetting that earnings are what drive the stock price. I am going to save a copy of this in my investing library.

posted over 2 years ago by Joshua from Pennsylvania

I am sending this article to my stock broker.
AAII gives a detailed analysis of and recommendations on a stock in focus at periodic intervals. They are available in archives.
Recently I invested in three such recommended stocks, namely, AMAT, CLF and JOY, with disastrous results.
Wouldn't it be nice if AAII would revise its price targets for recommended stocks in focus?

Ashok Choksi

posted 10 months ago by Ashok from California

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