Holding on to the Winners

Investor Monkey - Book of Investment

The year 2015 started off with news that introduced volatility to the stock market. Crude oil prices hit a 5-year low, the Euro slipped to a 9-year low against US dollars amid Greece woes and the Swiss Franc unpegged from Euro. All these economic news are causing huge stock market movements in different directions.

Your positive portfolio may seen a sudden drop in your unrealized profits, or even moved into the red zone, causing panic and wondering if you should continue to hold on tight and bear through the rough waters or to ditch ship with worries that the stock that you own will sink on the next wave that will hit.

Many a times people will tend to drop the stocks in their portfolio during uncertain times, hoping to save as much of the unrealized profits as they could and when the market turns around, they will watch in regret that they had exited their winning stocks.

So how should an investor decides whether if they should continue to hold their position and continue to ride along with their winners?

Knowing the company’s fundamentals

Even before investing in a company, it would be good to understand the fundamentals of the company. Not only would it be helpful to understand the company, understanding the company fundamentals thoroughly will help to reject any unfounded fears when the company stock price is being pulled down by the market.

Staying focus on weekly charts

Weekly charts are your friend when it comes to long-term investments. With lesser fluctuations in the charts as compared to the lower time frame charts like the daily or intra-day charts, weekly charts can help to smooths out noise on the lower time frame charts.

Selling only on signal

On some weeks, due to economic news, the stock price may be affected, causing the weekly chart to show one black bar. Having a bad week does not mean that it is time to sell the stock. Do take a closer look at your technical analysis and ask yourself if the sell signal has been triggered.

Bottom Line

The price of a company’s stock is usually affected by the market forces and economic news. However, the value of the company is dependent on the fundamentals of the company. Looking at both the technical chart and fundamentals of the company will help an investor better decide on whether to continue holding or to sell to wait for a better opportunity.

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