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newj101 (91.87)

Stick to the plan!

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October 02, 2009 – Comments (4) | RELATED TICKERS: STX , TDC

My biggest mistake was changing the game plan without a real reason.

I began making bigger systematic purchases of good companies in Nov of '08.

The plan was to hold these stocks for at least 1 yr no matter what.

This gameplan has worked out extremely well for my overall portfolio.

There is one problem.

It could have been even better had I not sold a couple of these before the 1yr minimum target.

Example 

One purchase was @ 4.4 per share. I sold it for 6.75 per share, before 1 yr was up, to move it into a stock that had more potential.

The stock I sold is sitting @ 14 per share now.

This is all no big deal except there was no real reason to sell that stock.

It was even a good dividend payer.

The stock I moved it to has done quite well, but I still had to pay for the moves.

Make sure you stick to the plan!

4 Comments – Post Your Own

#1) On October 02, 2009 at 10:04 AM, GenericInvestor (51.57) wrote:

I agree with this; I've lost more money because I've listened to these top and bottom callers.

 What I was doing is monthly investments in high-yield and high-quality companies such as MO and PM and dollar-cost averaging in. Instead becoming freaked on the advice of all these top/bottom callers has caused me to lose sight.

 I would have made more money and did better if it wasn't for the clock which is right once a day.

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#2) On October 02, 2009 at 10:28 AM, Gemini846 (90.93) wrote:

This is all about risk management. I'm not sure anyone who bought into stocks in Nov '07 on a call to buy up for Christmas would agree that sticking to the plan as they lost 70% was a good idea.

If you have a real compelling reason to move your money, then do it, and don't remorse if the stock you left behind ratchets up. Just try to understand if there was something you missed. Dividend payers are a different class entirely. The dividend protects some of your downside, but even these can get trapped and be forced to cut thier dividend leaving you high and dry. (Hi @ BAC, C, JPM we're looking at you).

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#3) On October 02, 2009 at 10:33 PM, newj101 (91.87) wrote:

The thing is. I was bying good companies not just dividend payers.

I built a whole portfolio from Nov - Feb that has turned into a windfall.

The point was I had no real reason to sell STX and put more towards TDC.

I did it and the returns are still spectacular. I just incurred extra fees that were not nescessary in  a few transactions.

The fees ofcourse didnt even dent the gains. It's just the point.

 

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#4) On October 20, 2009 at 12:02 PM, ikkyu2 (94.16) wrote:

One thing I have found that helps is to keep a little journal regarding my past trades and the reason for them.

And here is the kicker: you make the next trade's journal entry before you pull the trigger and execute it.  That way, you know what your reason is for doing the trade.

Flexibility is crucial.  But an ability to craft a plan and stick to it, or dump it when situations change, require that you:

1)  Know what the plan is.

2)  Know what the situations were when you crafted the plan.

3)  Be able to recognize when the situation has changed.

The journal helps you do these things. 

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