Always Sell Your Worst Stock First
May 28th, 2006 (Investing)
If you own a portfolio of equities, you must learn to sell your worst performing stocks first and keep your best acting investments a little longer. In other words, sell your cats and dogs, your losers and mistakes, and try to turn your better selections into your big winners.
General market corrections, or price declines, can help you recognize new leaders if you know what to look for. The more desirable growth stocks normally correct l to 2 times the general market averages. However as a rule, growth stocks declining the least (percentage-wise) in a bull market correction are your strongest and best investments, and stocks that plummet the most are your weakest choices.
For example, if the overall market suffers a 10% intermediate term falloff, three successful growth securities could drop 15%, 20%, and 30%. The ones down only 15% or 20% are likely to be your best investments after they recover. Of course, a stock sliding 35% to 40% in a general market decline of 10% could be flashing you a warning signal, and you should, in many cases, steer clear of such an uncertain actor.