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EnigmaDude (60.92)

Once Bitten, Twice Shy



October 16, 2009 – Comments (6) | RELATED TICKERS: IREBY , GNW , RJETQ

Over the past 9 months or so my investing "style" in my Roth IRA has evolved from a long-term investment approach to more of a swing trade account.  This is due primarily to my reluctance to hold individual stocks after they have gained more than 30% or so in value, fearing that they will suddenly drop and I will lose all my profits.  So even though I have picked many winners and have realized a 30% gain in my account overall in 2009, I am guilty of selling many of my picks far too soon.

Probably the best example was IRE.  I speculated back in March that the stock was ridiculously under-valued so I picked up a few shares at under $2.  When the share price reached $4 it seemed like a good idea to sell half and play with "house money".  Then when it went up to more than $6, I reasoned that it would pull back and probably would not go much higher and I sold my remaining shares.  I'm kicking myself now as the share price reached $20 just a few months later. It coulda been my first 10-bagger!

Then I repeated the mistake with RJET (got in under 5, sold at 8 and watched it reach 10), GNW and a few others.  But I feel that I am learning from my mistakes and it's all money that I am willing to risk anyway since I have other safer investments that I don't trade in and out of.

Just wanted to share my experience and wondering if others have similar stories.

6 Comments – Post Your Own

#1) On October 16, 2009 at 3:23 PM, Seano67 (23.47) wrote:

I think a lot of people probably have stories similar to yours. I know I sure as heck do. I think having a bit of an itchy trigger finger is perfectly understandable and natural too, given what took place last autumn and the fear and anxiety that generated. Hell, part of me is STILL waiting for the other shoe to drop. So for me, all that generated much more of a trader type mentality, as opposed to the long term buy and holder I'd always been. I now am no longer reluctant to book profits after they reach my target, and I've been burned on that too, the worst being selling out of CENX and BCS far too early (but still at a profit), and missing some huge, huyooge gains by doing so.

Ahhh well. You win some, you lose some, and so it goes. My mentality now has just become much more a matter of capital preservation, and trying to steadily rebuild the value of my portfolio after it was nearly slashed in two last year.

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#2) On October 16, 2009 at 4:31 PM, EV38 (29.87) wrote:

As long as you don't waste that wealth by holding it in cash then you should be ok. I've sold stocks far too soon because I thought they were overbought too, but then I immediately used the proceeds to buy something that was undervalued or hadn't moved yet. So temporarily it was a bad move, but eventually the new holding also did well and caught up or surpassed the performance of the old one after I sold it. Its all about opportunity costs.

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#3) On October 16, 2009 at 4:35 PM, GrandTheftHemi (< 20) wrote:

Nice post when I started this happened a lot 2 me as well. Try seeing the share position as 2 parts or even 3 instead of one LUMP Sum...just because U buy 1000 shares does not mean U have 2 sell 1000. Sure U may not get the glory of showing the pick closed here with the huge % increase shown...but hey it tells me U are being honest with your buys and sells and nothing wrong with profits in any market...What matters is real life and I assure U if U can hold onto some shares even if U only held 200 from a 1000 share initial position those 200 shares can earn as much as your original trade down the road..MULTI baggers can and do happen but the only thing the media digs is NEGATIVES.

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#4) On October 16, 2009 at 4:46 PM, EnigmaDude (60.92) wrote:

Thanks for all your comments. 

Seano - definitely concur that capital preservation has moved up in priority for me recently!

EV38 - I agree about the opportunity costs.  In most cases that is exactly what my reasoning was and for the most part it has worked to my advantage.

GrandTheft - U make several good points. I am all about keeping a Positive attitude!

Best of luck to all, and to all a good trade!


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#5) On October 28, 2009 at 10:35 AM, xlnxfool (< 20) wrote:

As my Dad always said... "Bulls make money, Bears make money... Pigs just get slaughtered".  When I make money, I try not to look back too much on if I sold too early.  If I stick to my "rules" about selling, I still typicaly come out ahead...

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#6) On December 06, 2009 at 11:34 PM, globalsailor (26.87) wrote:

I think you're worrying more about momentum than value.  Look at what you think the company is worth, and then hold it until it gets about 10% above that.  If you can't value a stock then the next recession comes, the market loses 30% again and you're wounded and hurting and you sell at the bottom and lose everything.  If you think you're too scared then just hold bonds.  Sorry to say, but it sounds like your emotions are going to beat you up.

Either way, in another market crash, everything crashes.  It doesn't matter if you get out of something good and go into something else.  It all goes.

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