What if one does not use timeframes as a reference but uses percentages ? In my TFSA ( where I have my riskier stocks ) I use 20% as a point of consideration to sell. I may be leaving money on the table but I have locked in a good gain. I would appreciate your thoughts on this approach. Would your answer on LMN be the same if one used the 20% ?
Thanks . Derek
NO; our answer was meant that, over a long time frame, the price today, whether $37 or $36, is not going to make much difference. Many investors wait for a pullback that may never come. Thus, with a long enough timeframe, if one likes a stock we think it should just be bought rather than playing cute on price. On the sell approach, we dislike the approach suggested, especially for smaller companies. One can never get a 1,000% return if one sells early. We prefer letting good companies compound returns over years, if not decades. This is how true wealth is created. A 20% gain sounds good, but after taxes less capital is available to compound, and even this year there are stocks up hundreds of percentage points already. The key is to make sure the gain is backed by fundamentals, and not sell 'just because it is up'. We like to ask ourselves what are the buyers today seeing, and why would they be buying and why are we selling?