Comments on: How to Decide When to Sell Stock

on 11/22/2005 As I personally practice, and discuss in my blog "Stock Picks Bob's Advice", I believe that setting sale points when making a stock purchase is a good idea. It is important to invest without emotional biases that may interfere with your own rational thinking.
As suggested by William O'Neill, in the CANSLIM strategy, it may be helpful to place a limit on how far you will let a stock drop after making a purchase. I place an 8% limit on my stock purchases. In addition, I like to sell my winners slowly, selling 1/4 of my position at a 30% gain, 1/4 again at 60%, 1/4 at 90%, 1/4 at 120%, and then 1/4 positions at 60% intervals. On the downside, if I have sold a stock once at 30% gain level, I will sell at break-even. Otherwise, I let a stock retrace only 50% of the highest sale point.

It sounds complicated, but with a good brokerage statement from Fidelity, I find it fairly easy to implement.

In any case, setting up your own strategy prior to purchasing a stock is very important if you are going to experience long-term success in investing! Bob

on 11/22/2005 Determine whether it would be better to hang on to the stock until the one-year-and-one-day ownership mark and qualify for the long-term capital gains tax rate versus the higher short-term capital gains rate.