It is important that when you have high gains on a stock, that you take some off the table. Let me give you a good example. I bought this Latin America mutual fund, before the stock market went in the crapper a couple of year ago. Before it went into the crapper, I was up over 80% on the fund and I had owned it less than two years. What I should have done, is taken that money I had made and sold it, but still keeping my original investment on the table. Why should I have done that? Because as Jim Cramer says "if you're a Pig, you're going to get slaughtered." In other words, if you get too greedy, then you will probably get into trouble.
So what happened to my fund? During the downturn, it lost all its earnings, and at the low point was down 30%. If I had taken the big earnings off the table, I could have still had that 80% earnings in my money market, or have bought some other fund or something. Instead, I lost it all and was in the hole 30%. This was my first experience with this, so I learned my lesson. That fund is now back up 30%, so I at least got the $$ I lost back (although I haven't looked after the big drop today, and I don't plan to)
So when you get big earnings on a stock, don't be a pig and take some $$ off the table!! Take that money and diversify into another stock/fund
2 comments:
Okay Jennifer it is clear after reading just a little on here that you are a genious and I know nothing. I want to invest a little but don't have much to start can you point me in the right direction?
Kelli gard
I would open something like a sharebuilder account (if you have under $2500) - where you can invest as little or as much as you like. Plus they give you $50 to start!! (free money :) ) You can choose individual stocks - choose companies you are familiar with - or pick an ETF, which is like a mutual fund, but with no minimum investment, or if you can find a mutual fund that low minimums, low fees (1% or less), and no load. but ETF is probably a good option
If you have more than $2500, open an account at a brokerage, like fidelity, where you can buy mutual funds and ETF's at no cost! I love the ETF's at fidelity and they have some great low cost, no-load mutual funds...
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