Stocks: Don't Marry Me
I know you have looked at the balance sheets and think I am a great value for the selling price. Or, you may have examined other information that supports your decision to buy me today. Your desire to keep me eternally and spread the wealth to your children and grandchildren may never happen because I change frequently and sometimes very drastically. The changes I make will happen when you least expect it or maybe it will happen when you need me the most. Because I am so unreliable and I change frequently, please don't marry me.What if this sign was posted next to every stock you ever thought about buying? You would be warned ahead of time that the prices change frequently and maybe even drastically. You would know that the stock market is not like a bank savings account. You aren't guaranteed to put money in and take out more than you deposited. This type of caution would make you aware that you need to keep an eye open and stay informed, but would it be enough to compel you to watch your stocks and get rid of them when you've made a profit? Stocks are not a bad investment. They are available and can be bought by people that have little or no money.
Whether a friend told you about an infamous stock tip or you've done your homework, it doesn't matter how you arrived at the decision to buy a particular stock. What matters most is how you manage the stock's investment once you own it. The management of a stock is not difficult. When you purchase a stock, you know when the stock price has increased or decreased. Anyone knows when they have made money. If the selling price is higher than what you bought it for, you've made money. But, do you know your selling point. Simply put, do you know how much money you want to make? Set a goal and stick to it.
Maybe you want to take a vacation. Using this short term objective, use the stocks you've invested in, make enough money to pay for the vacation, and sell the stock. The bottom line is profit. You've bought this stock to make money. Once that goal is achieved, sell. Sounds too good to be true, doesn't it?
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