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| On February 15, 1999 Dr. Sindell was
interviewed on CNNfn by Valerie Morris for the "Take it Personally" television
program. Dr. Sindell shared her expertise by pointing out how most investors keep losing
securities too long and sell winners too soon. The following discusses the five point
personal selling strategy she showed the viewers. |
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Should I Sell?
| The stock market is on a roller coaster. Experts can't tell if the market
is going up or down. Should you sell? Discover the selling indicators that can lock in
profits. If you decide to sell, use our personal selling system checklist to help you
prevent investment losses. Recent analysis of over 10,000 trading accounts at a U.S.
discount brokerage indicates that individual investors tend to hold onto investment losers
too long and sell winners too soon (except in December when tax-motivated
selling controls investor behavior). Hanging onto losing investments can be very costly. A
personal selling system can assist you in not getting emotionally involved with the
success or failure of your investment choices. This can help you sell at the right time
and reap your just rewards. |
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Creating Your Personal Selling
System
| Knowing which securities to sell and when to sell them is
the hallmark of a savvy investor. On the very day you purchase a security you should be
considering when you should sell and take your profits. However, don't focus just on sales
price. Take the time to research your decision-making. Sometimes it's hard to keep track
of all your financial judgements. A good solution is to put your personal selling rules in
a checklist. Of course, you can store your checklist on your computer's hard disk so it's
easy to access when you are evaluating your portfolio. |
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Example of a Personal Selling
System Checklist
| The following is a sample checklist that can help you get started. Feel
free to add your own selling signals or disregard the points that you don't feel are
important to your personal portfolio. Your personal selling system checklist is important
to the profitability of your portfolio. If you are thinking about selling an investment
use the checklist to compare your current state of mind with what has worked for you in
the past. |
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Personal Selling System Checklist |
- (1) The current price of the security dropped below your
pre-determined trading range When you purchase an investment
determine the target selling price and set up price alerts on the Internet. Go to Quicken.com
at www.quicken.com and complete the free
registration. Enter the investments you want to track in your Portfolio. Click on Alerts
to stock performance warnings to show volume changes, prices changes, earnings and
dividend announcements. For easy tracking, you can schedule alerts of company news and
stock performance to be automatically sent to your e-mailbox.
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- (2)The selling price of your security 50 percent higher
than when you purchased it and not likely to increase? Realizing
your profit is what it's all about. Check similar companies to see whether they're selling
at the same level or higher. If so, you may want to raise your target selling price (even
if its more than 50% greater than your purchase price.) If the selling price of your
winner is not likely to increase this may be a good time to sell.
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- (3) Your winner now represents more than 10 percent of
your entire portfolio You want to keep the asset allocations in
your portfolio balanced but don't want to miss any profits. What's a good solution for
getting back on target? Sell a portion of your holdings. That way, you can lock in part of
the profit and still benefit if the investment keeps rising.
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- (4) Corporate insiders are trading their shares Corporate insiders are individuals who own 10% of the company's stock or more. In
the U.S. the 1934 Securities Exchange Act regulates and monitors the trading activities of
these corporate insiders. Among other things, this means that insiders must disclose to
the public how many shares they are purchasing or selling. Often senior executives receive
stock options are part of their compensation. Sales by these individuals are usually to
make large purchases or because they need the cash. These sales may be only 5% the
holdings and meaningless. However, if the president is steadily selling shares and
currently doesn't own many shares in the company this may be a significant selling signal.
After all, if the company's president doesn’t want to hold the stock, should you keep
hanging on? Conversely, if the president is always buying shares and rarely sells, that's
a strong sign that at least one corporate officer thinks the company's prospects will
improve. For insider trading information see Yahoo! Finance at quote.yahoo.com. Enter the ticker symbol of the company
you are researching to get a quote. On the quote screen, click on the small box titled
More Info. Next you'll see information on Insider Trading and related data.
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- (5) The company has changed its core business or the
mutual fund changed its objectives? Have you witnessed a
material change in the company? For the latest news see CNNfn (www.cnnfn.com). Think about the original reasons you
purchased the securities. If the investment no longer meets these criteria, it may be best
to sell and move on. Additionally, if your own financial situation changes, you may want
to sell some of all of your current investments. For instance, your risk tolerance level
may have changed, your child is ready to start college or you plan to retire next year.
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Summing Up
| If you compared your investment to the Personal Selling
System Checklist and answered yes to three (or more) questions give serious thought
to selling. If your investment choice was a loser face up to your disappointment and take
your loses. If your investment was a winner you can laugh all the way from cyberspace to
the bank. |
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