Hedging the bet….

[Scott Pearcy]

#16775

Sean, I have been subscribed to a number of investing newsletters to get a broad scope of ideas when it comes to investing in the market……When one of the “other” newsletter writers makes a “BUY” recommendation, I always try to apply the principles that you have been trying to teach all of us knuckleheads (technicals, financials, P/E ratios, etc etc) before I make the decision to invest in that particular stock/ETF. As a result of this, I currently own several positions that rise as the broad market decreases…..When the market was doing great, these positions were in the red…..now that the market is dropping, these positions have turned profitable…….My question is…At what point should I sell (or should I sell them at all?)……?

In an effort to minimize clutter in my portfolio and concentrate on Logical Investor picks, as a position is profitable ($100 gains over purchase cost), I have been selling the position to protect capital and provide a supply of cash for averaging down on LI positions……Do you think this is a sound strategy?

[Sean Hyman]

#16779

I can’t say what you should do with other newsletter writers recommendations. Ultimately, that’s up to you. But its good problems to have if you’re thinking about when to lock-in profits or not.

Anything going up when the market is going down, will get temporarily spanked when the bear market bounce happens. Since there are violent moves right now, its usually better to be safe than sorry and take the conservative approach and lock in those profits when you know you have them. But in the end, that’s up to you.

[Scott Pearcy]

#16792

I did what I usually do in this case…..I took profits by selling a large fraction of my position while keeping some of the shares in the position to take additional profits if the trend continues…..On one position, I was up approximately 75% and about 40% on another position….

[Sean Hyman]

#16801

Usually, if you don’t take those size of profits, you’ll give them back. If you sell part, you usually want to sell at least half of your shares.

[FusionDude]

#16935

When I first started with Sean at UWR, I had my wife use a different newsletter for “diversity”. While her guys made money (and who couldn’t in an up market?), their choices were just not consistent with what I was learning from Sean. Ultimately, they went all to cash and disbanded the newsletter.

So I subscribed her to the Motley Fool. That was a huge mistake. Those guys are momentum traders without apology. Every recommendation they made, I would run through Sean’s screens of fundamentals, technicals, and sentiment, and they always failed. We didn’t buy a one of their picks, because the risks were just too high.

Now, we are both Logical Investors.

[Scott Pearcy]

#16939

I am trying to teach my wife about investing and using the charts from Sean’s weekly videos and monthly newsletters to get her to understand market behaviors….

[Sean Hyman]

#16952

Yeah, I had one guy leave my newsletter to go to the Motley Fool because it was supposedly cheaper. However, unfortunately, he probably lost his shirt this past week or two following momentum trading advice in a down market. So, it probably cost him far more in his account than an annual subscription costs.

The mistake was thinking that what we both did were pretty much apples-to-apples. But they’re really polar opposites.

You’ll find that most newsletters are momentum traders (high-risk). They’ll buy overvalued companies, money-losing companies, fundamentally weak companies, etc. They don’t care. They just want a stock with a sexy story. Well…we’ll buy if there’s NO sexy story but the fundamentals are solid and cheap, just like Warren Buffett would do.

[Sean Hyman]

#16953

Scott, that’s awesome that you’re teaching your wife. Most people don’t really know how markets work. So it’s great you’re teaching her.

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