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When I discuss stock ideas my thoughts are
for short term trading, normally no more than a few weeks holding at
the very most. There is an old saying in the market, “Bulls make
money and bears make money, but pigs get slaughtered.” What that
means is not to be greedy, take your profit and run. The way I look
at it is if a person goes with a five year CD and is lucky enough to
get and APY of 2% why should you expect 20% return on a stock? If you
buy a $25.00 stock and it goes up a dollar per share you have made 4%
on your investment. Hopefully you can do better but even 4% isn't bad
for a couple weeks. Annualized that is 104%. If it gets near 8% my
finger gets itchy on the sell button. How would you like a CD earning
that?
There
is something called a limit order. That means you are putting in a
sell order (or buy) but it will not fill until the price hits your
entered price. In the above example for 8% gain you would enter a
limit sell of $27.00. Many times a stock will fluctuate over a dollar
in a day of trading so you want to be ready if your price is hit. One
must also learn to take a loss if the market is against you. Don't
just keep riding it down. Of course commissions are a factor as well
but for under $20.00 total for buy and sell it is not a big deal.
I
am never sure if people like what I am posting without feedback. If
you enjoy some of the occasional investment analysis please drop me
an email so I know this is not too far off topic for the blog. There are slow news days to fill but I don't want to bore you either.
Ken
Dillenburg