Regret of selling winning stocks early

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kappy
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Re: Regret of selling winning stocks early

Post by kappy » Fri Nov 03, 2017 9:20 pm

I made my first foray into investing by putting a couple grand in AAPL back when the iPod was getting big. I rode it up to 700, down to 350, then back up again. I found Bogleheads a couple years ago and realized how risky it was to hold most of my portfolio in one company. I began selling last year trying to control LTCG's. Now, it seems like every time I go back to sell more, the dollar value is back up to where it was when I sold the last time :sharebeer

Caduceus
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Re: Regret of selling winning stocks early

Post by Caduceus » Mon Nov 13, 2017 4:58 pm

nedsaid wrote:
Sun May 01, 2016 11:57 am

Yes, you have suffered from the "Nedsaid effect" which occurs when the investment you sell outperforms what you bought to replace it. This seems to have happened to me at a ratio of 2:1 or even 3:1. Thus my reluctance to sell investments, heck I don't even like to rebalance my portfolio! A trader I am not.
Dude, I can identify with this so badly. I remember taking a week off work to study for an exam, and during that week, it so happened I was thinking of buying a particular position. I ended up purchasing a third of the shares at its one-week low, one third of the shares at its one-week HIGH, and another third at some other high point. Totally failed at trading. It was a good lesson that you cannot predict short term movements in share prices. Frequently, the shares would move down to a low point, and I'd say "well, what's the chance that it won't go down another $0.01?" Turns out, more frequently than I thought!!!

hightower
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Re: Regret of selling winning stocks early

Post by hightower » Mon Nov 13, 2017 5:09 pm

So, back before I was a boglehead and did all kinds of stupid things with my money, I bought about 5k in Tesla stock when it was trading at $180/share. A few weeks went by and it went up to like 200/share and I thought wow this is great! Then it dropped again a few weeks later to 188, so I spooked and sold it all.
This summer is hit 380/share. Had I held on to those shares and sold then I could have doubled my money. Instead I walked away empty handed :(

Valuethinker
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Re: Regret of selling winning stocks early

Post by Valuethinker » Mon Nov 13, 2017 5:09 pm

Wagnerjb wrote:
Fri Jan 29, 2016 1:19 am
I know a fair number of people who used to work at Enron and who lost a bunch when the company collapsed. For everyone who got lucky with company stock and options, there is an Enron story.

Best wishes.
Nortel. Was one of the world's largest Telco equipment makers.

Employees lost everything *and* had their pensions slashed.

aristotelian
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Re: Regret of selling winning stocks early

Post by aristotelian » Mon Nov 13, 2017 7:06 pm

hightower wrote:
Mon Nov 13, 2017 5:09 pm
So, back before I was a boglehead and did all kinds of stupid things with my money, I bought about 5k in Tesla stock when it was trading at $180/share. A few weeks went by and it went up to like 200/share and I thought wow this is great! Then it dropped again a few weeks later to 188, so I spooked and sold it all.
This summer is hit 380/share. Had I held on to those shares and sold then I could have doubled my money. Instead I walked away empty handed :(
4% return on a few days of trading is not empty handed. Could have been much, much worse.

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nedsaid
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Re: Regret of selling winning stocks early

Post by nedsaid » Mon Nov 13, 2017 9:00 pm

Caduceus wrote:
Mon Nov 13, 2017 4:58 pm
nedsaid wrote:
Sun May 01, 2016 11:57 am

Yes, you have suffered from the "Nedsaid effect" which occurs when the investment you sell outperforms what you bought to replace it. This seems to have happened to me at a ratio of 2:1 or even 3:1. Thus my reluctance to sell investments, heck I don't even like to rebalance my portfolio! A trader I am not.
Dude, I can identify with this so badly. I remember taking a week off work to study for an exam, and during that week, it so happened I was thinking of buying a particular position. I ended up purchasing a third of the shares at its one-week low, one third of the shares at its one-week HIGH, and another third at some other high point. Totally failed at trading. It was a good lesson that you cannot predict short term movements in share prices. Frequently, the shares would move down to a low point, and I'd say "well, what's the chance that it won't go down another $0.01?" Turns out, more frequently than I thought!!!
I am told that investment professionals suffer from this too. Not sure they experience this with the same frequency that individual investors do. The "Nedsaid effect" seems to work with mutual funds too, the effect not just limited to individual stocks. Sometimes what happens is that people try to be patient but at some point they reach a point of utter disgust and sell. That seems to be the precise point at which the investment goes up! Performance chasing is probably a big cause for this effect but I try to buy at bargain prices and this effect still happens! The buy decision is relatively easy to make, the sell decision is much more difficult.
A fool and his money are good for business.

Caduceus
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Re: Regret of selling winning stocks early

Post by Caduceus » Tue Nov 14, 2017 3:23 am

nedsaid wrote:
Mon Nov 13, 2017 9:00 pm
The buy decision is relatively easy to make, the sell decision is much more difficult.
I would have thought from a trader's perspective that it would be the opposite? This year I've had two positions go up 30% in two months and I've sold them immediately. I knew there was a chance they might go up another 30%, but I thought they were at most 15 or 20% undervalued at that point and I was happy to take the gain quickly with no regret if they went up even more (and they have!)

Buying is tough because you have no yardstick. I sat through the ups and downs of a stock for the better part of a week and didn't have the slightest inkling what was low enough. And, like I mentioned, I ended up buying at a price much higher than if I had simply dumped all that money the moment I logged into the trading account. What a glorious waste of time.

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fire5soon
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Re: Regret of selling winning stocks early

Post by fire5soon » Tue Nov 14, 2017 6:35 am

In the past I worked for a company who was considered a leader in its field. The stock was doing very well. The company match in our 401k was automatically invested into company stock. However every time the company match hit my account I sold the stock the very next day and instead invested in my boring old index funds. As I watched the stock rise I wondered at times if I was making the right decision, but I stuck to my plan.

Within a few years of my starting there 2007/2008 happened. My company was hit hard by the financial crisis and filed for bankruptcy. Their stock ultimately ended up being worthless and I was laid off (along with everyone else). Now I don't feel so bad about my decision...

I didn't so much learn a lesson with this experience, rather it just solidified what I believed I should do by making a theoretical diversification argument a real life experience for me.

Good luck with whatever you do.
A man is a success if he gets up in the morning and gets to bed at night, and in between he does what he wants to do. - Bob Dylan

AnalogKid22
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Re: Regret of selling winning stocks early

Post by AnalogKid22 » Tue Nov 14, 2017 11:42 am

Texas Pacific Land Trust (TPL) - A retired friend who day-trades as a hobby tipped me off to this in Summer 2014, when oil stocks were plummeting, due to fracking and over-supply. The stock was 225 a few months earlier and I got in at 175. It kept dropping and every week he kept telling me to buy, which I didn't do. It went down to 115 and he kept telling me to buy, but all I could see was my investment at 175 in the red and steadily losing value. It gradually came back and I put a sell order at 174, suffering a very minor loss. The stock is now over 400 and still rising - had I listened I'd have millions.

MotoTrojan
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Re: Regret of selling winning stocks early

Post by MotoTrojan » Tue Nov 14, 2017 12:22 pm

AnalogKid22 wrote:
Tue Nov 14, 2017 11:42 am
Texas Pacific Land Trust (TPL) - A retired friend who day-trades as a hobby tipped me off to this in Summer 2014, when oil stocks were plummeting, due to fracking and over-supply. The stock was 225 a few months earlier and I got in at 175. It kept dropping and every week he kept telling me to buy, which I didn't do. It went down to 115 and he kept telling me to buy, but all I could see was my investment at 175 in the red and steadily losing value. It gradually came back and I put a sell order at 174, suffering a very minor loss. The stock is now over 400 and still rising - had I listened I'd have millions.
A 2-4x investment would've made millions?!?

AnalogKid22
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Re: Regret of selling winning stocks early

Post by AnalogKid22 » Tue Nov 14, 2017 12:30 pm

MotoTrojan wrote:
Tue Nov 14, 2017 12:22 pm
AnalogKid22 wrote:
Tue Nov 14, 2017 11:42 am
Texas Pacific Land Trust (TPL) - A retired friend who day-trades as a hobby tipped me off to this in Summer 2014, when oil stocks were plummeting, due to fracking and over-supply. The stock was 225 a few months earlier and I got in at 175. It kept dropping and every week he kept telling me to buy, which I didn't do. It went down to 115 and he kept telling me to buy, but all I could see was my investment at 175 in the red and steadily losing value. It gradually came back and I put a sell order at 174, suffering a very minor loss. The stock is now over 400 and still rising - had I listened I'd have millions.
A 2-4x investment would've made millions?!?
No, I'd have millions. I had over half a million to invest, which I moved to index funds.

MotoTrojan
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Re: Regret of selling winning stocks early

Post by MotoTrojan » Tue Nov 14, 2017 12:42 pm

AnalogKid22 wrote:
Tue Nov 14, 2017 12:30 pm
MotoTrojan wrote:
Tue Nov 14, 2017 12:22 pm
AnalogKid22 wrote:
Tue Nov 14, 2017 11:42 am
Texas Pacific Land Trust (TPL) - A retired friend who day-trades as a hobby tipped me off to this in Summer 2014, when oil stocks were plummeting, due to fracking and over-supply. The stock was 225 a few months earlier and I got in at 175. It kept dropping and every week he kept telling me to buy, which I didn't do. It went down to 115 and he kept telling me to buy, but all I could see was my investment at 175 in the red and steadily losing value. It gradually came back and I put a sell order at 174, suffering a very minor loss. The stock is now over 400 and still rising - had I listened I'd have millions.
A 2-4x investment would've made millions?!?
No, I'd have millions. I had over half a million to invest, which I moved to index funds.
Wow. That is what I was getting at, this would've been a substantial sum (most of your life's savings?) to put into a single company. You have more guts than I. I wouldn't sweat it, you easily could've gone broke; and to me, a 3-4x return on investment is not high enough for that kind of risk.

AnalogKid22
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Re: Regret of selling winning stocks early

Post by AnalogKid22 » Tue Nov 14, 2017 12:53 pm

MotoTrojan wrote:
Tue Nov 14, 2017 12:42 pm
AnalogKid22 wrote:
Tue Nov 14, 2017 12:30 pm
MotoTrojan wrote:
Tue Nov 14, 2017 12:22 pm
AnalogKid22 wrote:
Tue Nov 14, 2017 11:42 am
Texas Pacific Land Trust (TPL) - A retired friend who day-trades as a hobby tipped me off to this in Summer 2014, when oil stocks were plummeting, due to fracking and over-supply. The stock was 225 a few months earlier and I got in at 175. It kept dropping and every week he kept telling me to buy, which I didn't do. It went down to 115 and he kept telling me to buy, but all I could see was my investment at 175 in the red and steadily losing value. It gradually came back and I put a sell order at 174, suffering a very minor loss. The stock is now over 400 and still rising - had I listened I'd have millions.
A 2-4x investment would've made millions?!?
No, I'd have millions. I had over half a million to invest, which I moved to index funds.
Wow. That is what I was getting at, this would've been a substantial sum (most of your life's savings?) to put into a single company. You have more guts than I. I wouldn't sweat it, you easily could've gone broke; and to me, a 3-4x return on investment is not high enough for that kind of risk.
Indeed. I'd been saving and sitting on that cash for years and was looking for a huge payout. This was a very close friend of the family who's made millions investing as a hobby, but not an extravagent person in the least. I very much trusted him and knew he wouldn't suggest a loser, but, like so many stock market horror stories we hear about, I couldn't help thinking of the stock tanking and the guy feeling horrible and embarresed. It was certainly a gamble and I'd be in a much different place had I stayed in and watched the price sink to double or single digits. Since then, I'm in great shape to retire in 5-10 years.

DrGoogle2017
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Re: Regret of selling winning stocks early

Post by DrGoogle2017 » Tue Nov 14, 2017 1:04 pm

I regretted of letting go of my puts on PCLN too early last week, I had badminton class in the morning, so that’s why I let them go early. When I came back from my class, I saw my puts went up significantly. As usually, I let go of my winning trades too soon, but at least I made some money. But it bothers me ever since.

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nedsaid
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Re: Regret of selling winning stocks early

Post by nedsaid » Tue Nov 14, 2017 9:06 pm

Caduceus wrote:
Tue Nov 14, 2017 3:23 am
nedsaid wrote:
Mon Nov 13, 2017 9:00 pm
The buy decision is relatively easy to make, the sell decision is much more difficult.
I would have thought from a trader's perspective that it would be the opposite? This year I've had two positions go up 30% in two months and I've sold them immediately. I knew there was a chance they might go up another 30%, but I thought they were at most 15 or 20% undervalued at that point and I was happy to take the gain quickly with no regret if they went up even more (and they have!)

Buying is tough because you have no yardstick. I sat through the ups and downs of a stock for the better part of a week and didn't have the slightest inkling what was low enough. And, like I mentioned, I ended up buying at a price much higher than if I had simply dumped all that money the moment I logged into the trading account. What a glorious waste of time.
There is a whole different perspective if you are a trader. I am not looking for the quick buck. I am looking to own stocks as a proxy for owning my own business. As an investor, I am looking to buy good stuff that I can own for a long time.

I can tell you that the sell decision is difficult. First, it is very likely you will sell too soon. Second, no guarantee what you buy to replace it will do any better. If I was the only person saying this, I would know I was way out there in left field. Every time I discuss the infamous "Nedsaid effect", I get laughter from other Bogleheads who can relate. My broker tells me professional investors experience the same thing. There is also academic research behind the "Nedsaid effect", particularly for individual investors.
A fool and his money are good for business.

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