Compounding gains

I’d be interested to hear any strategies you use for taking profits and reinvesting to compound your gains.

Are you a small-cap long term holder and let the company do the compounding or do you take a certain percentage of profits when you reach a particular target and then move that into a new stock? Or are you doing something else?

Currently I don’t really have a strategy, when I sell it’s usually on impulse and recently made the mistake of taking all of a particular stock off the table when it was just getting started (yes, TSLA).

3 Likes

Yes, feel your pain did something similar, it’s all part of the learning process.

One thing I’m surprised at is that you can’t sell specific “blocks” of shares. So say I purchased 1000 shares in tesla but in two separate 500 lots, each with substantial differences in price - I can’t at sell time decide which of those blocks I want to sell. I might have made a decent return on the first 500 and so want to sell those as the roi is higher but I can’t do that.

Unless of course someone here is going to point out to me that you can and I’ve been a muppet for a while :smiley:

I don’t know about everything you do but this isn’t muppetary behaviour.

Shares are sold as FIFO (first in first out)

Ahh! - thanks for clarifying… hmm - that changes things a little in terms of keeping track of purchases then.

I shall continue being a muppet outside of FT :grinning:

1 Like

I only sell for 3 reasons:

  1. A new company has come into my spotlight and is considerably better than the companies I am invested in at that time. I will happily sell to invest in better prospects.
  2. The story of the company has changed. The metrics I track & monitor are not performing and I feel they are on a decline. (If you read any of my blog posts, you’ll see “metrics I am watching” at the end. These indicate whether the company is improving / declining IMO)
  3. I’ve run out of money to buy Gregg’s and need to sell all my stocks & shares to fulfil my addiction.
4 Likes

I’m still very new to investing but my personal opinion is that skimming off some of the profit makes little sense unless 1. you invested an overly large percentage of your portfolio into one position, got lucky and now want to diversify, or 2. profit is approaching or above 100%, so that it’s viable to recoup your initial investment and still have a worthwhile stake in the company.

I don’t advise number two unless you are knowingly holding a higher risk stock that you believe in but whose value is intangible - Tesla being the classic example. Tesla’s market cap suggests it’s worth as much as the next dozen car manufacturers combined based on a combination of its potential and their potential downsides. If at some point in the future the consensus were that it will “only” end up twice as big as Toyota, well that would be one heck of a haircut compared to current valuation.

EDIT: to clarify I was responding to AndyPandy’s suggestion of a partial sale. The broad “when to sell” is a far too philosophical question for me to want to deal with.

1 Like