cindys
4/5/2013 4:37:00 AM
On Apr 4, 11:52 am, David Makowsky <dlmakow...@gmail.com> wrote:
> On Thursday, April 4, 2013 8:04:05 AM UTC-5, cindys wrote:
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> > Years ago, I made a lot of money by investing in Teva. In 2010, it was
> > at its all-time high of over 60 dollars/share, but I was a less savvy
> > investor then and hung onto it too long and ended up giving back about
> > 20% of my profit (should have jumped ship when the stock had declined
> > to 10%).
> > Since 2010, Teva stock has had its ups and downs but mostly downs.
> > Maybe Teva will start going up and return to its high and exceed it at
> > some point, but we have been in a strong bull market for several years
> > now, and a lot of solid companies are up 30% or more over the past few
> > years.
> > While a person is waiting for a stock to come back, other companies'
> > stock is rising. It makes sense to me to invest in companies whose
> > shares are currently on the rise (as long as the company has good
> > fundamentals and the shares aren't overpriced). By waiting around for
> > a company to come back, a person loses out on a lot of profits that
> > could be made by investing in other companies in the meantime.
> > Just my opinion.
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> I have worked in the finance industry for the past 11 years and I have an MBA with one of my concentrations in Finance. I know a "little" about this.
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> Market timing (When to get in and out of an investment based on predicting when that investment will start/stop to go up or down at precise instant in time) is very risky and is something to stay away from unless you have the stomach for such risk and can afford to lose money. There are few experts on market timing and I wouldn't believe most people who claim they are experts. It is very difficult to nail down and many of the "best" have lost a ton of money attempting to time the market.
I didn't say anything about trying to "time" the market. What I was
saying is the first rule of investing is "don't lose money." If you
own shares in a certain company and you see that the shares have been
progressively trending downward over a certain period of time and have
now fallen over 10% with no end in sight, I think it might be a good
idea to think about selling those shares to cut your losses. If my
shares in Company ABC have gone up 50% since I bought them and now
have gone down 20%, that may not be a 20% loss on my original
investment, but it sure is a 20% loss on my profit. If I had sold when
the shares were down only 10%, I would have preserved more of my
profit.
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> That you lost a little from what you gained on your investment (Even going from a 10% loss to a 20% loss) because you stayed with a good thing for too long is not that big of a deal.
The shares didn't fall 20% overnight. It was over an extended time
frame. The reason it happened was because I was buying and selling
shares through a local stockbroker at the time, and his commission was
$65 per transaction, so a person thinks very hard before spending
$130, especially because it wasn't as if I was investing thousands of
dollars at a time. Also, I wasn't following my stocks on line on a
regular basis. Now, I use an online broker, which is a $10
commission, and not only can I follow my investments every day but I
can read analyses and all kinds of information on line about any
company any time I want.
In the olden days of dealing with a local broker, I was operating
blindly. Yes, I could go online and see that shares of Teva went up
or down a half a point today, but I had held Teva for about 10 years
and didn't remember how many shares I had, what I originally paid for
them, what they were worth last year, last month, last week, etc. I
would get a monthly paper statement in the mail, and I was going by
that, and it showed my original investment and how much the shares had
gone up or down since the previous statement. For me, it was hard to
get the big picture. With online trading, in 2 seconds, I can see the
activity (of the share prices) from the day the company went public. I
can go back 1 day, 5 days, 6 months, 10 years, whatever I want.
>Consider how well you did over the entire time you invested in it.
Yes, but I can guarantee you that if I owned Teva today, I would have
a trailing stop on it to automatically sell if the stock ever lost 10%
off its highest value (since I owned it). I have trailing stops on all
my investments. It's a way to cut losses. In fact, the IBD (Investors
Business Daily) advises that if a stock drops 7 or 8% (I think they
used to say 11%), sell it no matter what (to cut losses). To me, this
is a way to avoid risk, not incur more risk. The worst thing that can
happen is that the stock will subsequently rise a significant amount,
and the investor will lose out on greater profit. There are plenty of
ways to engage in high risk behavior in the stock market, but this is
not one of them.
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> I actually wrote a lot more, but I have since deleted it since I am afraid it was too complicated and is not really the topic of this group.
Well, I hope this post isn't rejected, as traffic on SCJM has been
very slow (I haven't had as much time to participate), so it's nice to
have something interesting to discuss, even if the Jewish content
involved is rather limited.
Best regards,
---Cindy S.