This is a dilemma that I’m faced with on a daily basis: Am I being responsibly patient or irresponsibly greedy? In other words, when I’m in a stock, let’s say, that’s doing really well and is sending my P/Ls up nicely, I have to decide how much longer to hold on to it. Do I sell some? Do I hold it all? Do I sell it all?
1. the capacity to accept or tolerate delay, trouble, or suffering without getting angry or upset
1. intense and selfish desire for something, esp. wealth, power, or food
Investors in the fund that I manage come from all over the world and want me to do two things: 1) make them money and 2) don’t lose them money. So do we lock in the profit? Let it roll? Or sell pieces along the way? And if so, are pieces 1/4, 1/3 or 1/2??
A good friend of mine once game me some advice on this topic:
If you sell half, you’re right either way because if it keeps going up, at least you still have half, and if it goes lower, well, at least you got out of half.
But I can turn that around and make the argument that you’re also wrong either way. If it goes up after you sold half, then you shouldn’t have sold it, and if it goes lower, you’re still stuck with half. So either way you look at it, we still have the same dilemma.
I don’t really have an answer for this, which is why I’m writing a quick post about it. I really just try my best to trim near resistance levels and pick some up at good risk/reward prices near support.
This is something I have to worry about every day: Is what I’m doing patience or greed? I think the answer lies in defining your time frame and market objectives (see here).
Do you guys find yourself in this situation? How do you deal with it?