Take the winning off your tables. Sell your stock when you have made solid gains. A gain of over 10% is solid in my book.
For every stock in your portfolio there should be a price you’re willing to pay and a price you’re willing to sell. The markets take stocks up and down for all sorts of irrational reasons. When you have solid gains, take them. Sell everything, cash out completely and wait for the next dip.
Don’t be impulsive. Don’t buy all at once. Buying in increments is a far better strategy that helps remove the emotion and impulsiveness from investing.
On the flip side, also sell in increments. If a stock has a big up day, sell a little. When a stock is going up your instinct will always be to chase it and want to buy more. In fact, what you should be doing is the exact opposite, buy low, sell high.
Diversify Diversify Diversify
This runs contrary to our natural instincts. When Welspun is rising, we want to be 100% invested in Welspun. So while you will undoubtedly hate yourself for being stuck with defensive stocks when you see every day Welspun roaring to new heights. Day will some come when you get clobbered and you will realize the importance of diversification.
Same rule applies for having too much invested in one sector.
Talk to someone. Have friends in this trade. Don’t be alone. Internet is the best and the worse thing that has happened to trading. While it has made trading very quick and efficient, it has also made it a solitary affair. One way to cut down on investing mistakes is to force yourself to articulate why you would like to buy something. Can you explain what the company does? What are its main products? What makes them unique? These are all questions investors should be able to answer to a friend, colleague or family member.
What is it that you have and others don’t. What is your edge. What makes you different in this dog eats dog market. To make money, you have to do things differently than others. Ask yourself, ” What do I know about this stock that others don’t? Do I like this stock more than others I already own? Is this investment worth selling something else to replace it?