Talking stocks, trading, and investing in general

Discussion in 'Business, Careers & Education' started by mikeman, Feb 2, 2011.

  1. Piobaire

    Piobaire Not left of center?

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    Neophyte question here: I often see people post about how a stock was down and they dump it when they get back to par for them. Is this more a psychological pitfall of investing vs. a smart move? I mean, if the stock has gone up, why assume the high point is where you purchased it at? Either the reasons behind the move are probably such that it won't hit your purchase price or it will exceed your purchase price. Seems to me picking your purchase price as a selling trigger really makes no sense from a fundamental basis as the conditions are such that it will never get back to your purchase price or likely materially exceed it.


    Again, I freely admit I am not an investment guru, so interested to see what people think of my analysis.
     
    Last edited: Jul 30, 2014


  2. GreenFrog

    GreenFrog Senior member

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    Piob, I had that mentality for AAPL and said I was going to dump that bitch the moment it broke even. All because I was so sick of being -20% for two years.

    I definitely haven't sold it and think it has lots of upside now that it's got decent momentum going for it and it's now a favored darling of Wall Street again.
     


  3. Piobaire

    Piobaire Not left of center?

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    So you're voting on a psychological pitfall then too?
     


  4. GreenFrog

    GreenFrog Senior member

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    Absolutely. As is with all prudent investment decisions, you need to re-evaluate once you get to break even if you're seriously considering selling it.
     


  5. jbarwick

    jbarwick Senior member

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    It is psychological. Damn ORCL had it out for me back in 2011. How I look at it though is that, I liked stock X at say $28 and anything below is worth buying more so my break even drops but I keep in mind my original price as a level at which to watch the stock since I liked it at that price in the past. I bought down on ORCL negative earnings that by the time I hit my original purchase price I was actually up something like 2-3% so I got out of it to look for other stocks.
     


  6. guyver00

    guyver00 Senior member

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    It's all psychology, it's called loss aversion. Rationally, a person should gain/loss the same amount of happiness when a stock double/half, since it should be proportion to the amount gained/lost. But researchers found that people generally suffer a lot more unhappiness when there is a lost, usually twice the amount of happiness with the same gain.

    The explanation is that evolutionary speaking, our cave dwelling ancestors would die more likely if, for the same risky behavior, lose half of their food cache than double the cache.

    Rationally, if you're waiting for a stock to break even, it might take years before that happens. You could've sold the dog at a lost, and move the money to other, better opportunities, but instead, most people don't do it because emotionally it sucks to sell at a lost.
     


  7. idfnl

    idfnl Senior member

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    LOCO baby, LOCO

    Bought at the open and am up 24% TODAY

    Just sold and kept the profit in free shares.
     
    Last edited: Jul 30, 2014


  8. Piobaire

    Piobaire Not left of center?

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    Thanks for the input, all. I almost did a similar thing this spring with an ETF when what had been a loss for a couple of years, started approaching the green again. I decided if it could move north enough to get me even it could move north enough to make me some actual money. I held and it has.
     
    Last edited: Jul 30, 2014


  9. otc

    otc Senior member

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    Opened my first taxable account this week (or rather, funded it...the account itself has been sitting empty for years). Was just sitting on far too much cash with nowhere to put it.

    Its at Schwab since they handle my checking account. Not sure if I like them as much as TD Ameritrade (their no-fee funds and ETF selection isn't as good IMHO), but regular trades are a buck cheaper, and transfers to and from my checking account are instant, rather than having to initiate and wait for an ACH transfer to clear.


    Purely psychological. Ignoring tax issues (where you might try to harvest a loss), the only thing that should matter to you is the current price. If you think the future looks good, you should buy/hold, if it looks bad, you should sell.

    If we were in a world without transaction costs, you could pretend that you have to re-purchase every stock every morning. Would you still buy those losers today? If not, why are you holding them? They could be invested in something that you would buy today.

    Of course there can be details around the edges. Like, if I owned netflix, I might think it is going to go up, but not want to buy any more than I already have since I don't want to grow the share of my portfolio that is in such a speculative stock.
    Similarly, Even if I think netflix is going to go up, I might want to reduce my holdings, because they have already doubled in the past year and I don't want such a large speculative position.
    So, for portfolio management reasons, I might make a decision that I might not make in a vacuum.
     


  10. stevent

    stevent Senior member

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    Congrats!


    Thanks will check it out
     


  11. idfnl

    idfnl Senior member

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    Argentina donkeys are going to fuck up the market up today.
     


  12. jbarwick

    jbarwick Senior member

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    Argentina, Europe, and 1,000 jobs. If anything, today would be a good day to post earnings as the market already hates everything else.
     


  13. idfnl

    idfnl Senior member

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    I did some triple shorts but they're not moving, dumped them. Hopefully that's a sign the market will strengthen as the day moves.

    I may start a position in PNRA today... seems beaten up enough.
     


  14. GreenFrog

    GreenFrog Senior member

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  15. otc

    otc Senior member

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    Snap-On has been looking pretty good since I bought it in January.

    SMLP is still doing great too.

    Vestas has fallen back a little, but I think it still has good potential. Big orders coming in abroad, making a bunch of new jobs in the US, looks like there is starting to be more US interest in turbines. Unfortunately, I have it in one of those situations like I mentioned in my last post: I like it, but the position has performed so well in the past year that I shouldn't buy more of it and should actually be selling some to re-balance because I now have a significant % of that account invested in a single foreign stock.
     
    Last edited: Jul 31, 2014


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