Struggling Over whether to Sell my Tesla Stock

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goodenoughinvestor
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Struggling Over whether to Sell my Tesla Stock

Post by goodenoughinvestor »

I know there is another long thread addressing a similar situation but reading through it just increases my agita. In general I am an index-fund, passive investor. But last year when I had a bit of cash in my Roth I bought some Tesla on a whim. I thought/think it is possible that it will become extremely valuable (a future Apple, Amazon etc.) and bought it with the assumption I would hold it long-term, maybe pass it to the next generation eventually. I didn't have any special insight to back up this notion, just a gut feeling which seemed like enough since I was "risking" such a minute portion of my net worth. Now my stake is in the 6 figures and about 4% of my portfolio. I'm struggling over whether to sell (in Roth, so no tax issues). My overall portfolio is basically 55 index funds (and tesla)/and 45 cash (mostly CDs), so pretty conservative. The future of the stock is beyond my powers of prediction, obviously, but I'm struggling with two separate "tenets" of my investing approach: 1. Hold long-term/stick to my plan. vs 2. I should never have bought a single stock anyway so since I got lucky I should take the money and run.
Any advice on how to think about this?
wilked
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Re: Struggling Over whether to Sell my Tesla Stock

Post by wilked »

There's an easy solution
Image
an_asker
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Re: Struggling Over whether to Sell my Tesla Stock

Post by an_asker »

If I were in your shoes, I would sell half and immediately transfer the proceeds into some index; and let the other half run (or sink, as the case maybe). If it runs - and reaches the current total - again, I would sell half. If it sinks ... maybe I would sell if it sinks 50%.

Note that this is a hypothetical scenario. I cannot guarantee that I would function exactly like this because I won't be in this situation (I think)!! :oops:
Onlineid3089
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Re: Struggling Over whether to Sell my Tesla Stock

Post by Onlineid3089 »

an_asker wrote: Tue Sep 15, 2020 10:55 am If I were in your shoes, I would sell half and immediately transfer the proceeds into some index; and let the other half run (or sink, as the case maybe). If it runs - and reaches the current total - again, I would sell half. If it sinks ... maybe I would sell if it sinks 50%.

Note that this is a hypothetical scenario. I cannot guarantee that I would function exactly like this because I won't be in this situation (I think)!! :oops:
I agree. I'd pick out some number that sounded good to me - maybe 50%, maybe some even dollar amount, and move that out into an index fund. The rest I'd let ride just to see what happens :beer

Of course, I'll also probably never be in that position. I'm too risk averse to buy an individual stock so I'll never luck out with those huge gains.
e5116
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Re: Struggling Over whether to Sell my Tesla Stock

Post by e5116 »

^Yes, I agree with the above. I'd "hedge" my emotions and sell some and keep some. Then you can't be wrong!! :) You can always sell more later and then say "well, at least I already sold a bunch" or "I'm glad I held onto some for longer!"
Xrayman69
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Re: Struggling Over whether to Sell my Tesla Stock

Post by Xrayman69 »

Don’t feel bad about making money. However, you only made it if you cash some out.

My strategy on these “educated and intentional” shots (don’t like to call them long shots as I’m also conservative and only invest in individual companies that I am familiar and use the product - or family with product) is to make sure I cash out my basis (initial investment). I would then take that basis and redirect into you ROTH account with your other equities holdings.

From the remaining value, given that you are already in limbo and unsure (hold, sell, hold, sell....) I would take out 50% and sell then direct again into your ROTH equity holdings. Let the other 50% go On the proverbial “ride” (pun intended).

I did similar things with my hometown based seattle companies and still enjoying the free roll ride (none of my own money left for over a decade).
FoolMeOnce
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Re: Struggling Over whether to Sell my Tesla Stock

Post by FoolMeOnce »

If it wasn't for taxes, I would sell a large chunk of my stake in Tesla. In fact, I have been selling a lot anyway, despite a big tax hit (my price per share is in the single digits). You have the luxury of avoiding taxes (and the bonus that you won't be taxed on withdrawals, either!). Sell at least half.
sambb
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Re: Struggling Over whether to Sell my Tesla Stock

Post by sambb »

if in doubt and on the fence, then sell half. Dont have to do all or none. Can do half and half if you are on the fence. Seems to be work for a lot of investment issues.
aristotelian
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Re: Struggling Over whether to Sell my Tesla Stock

Post by aristotelian »

Would you buy Tesla with $100k cash right now? Do you have any reason to believe it is worth more than the market thinks? If not, sell. You do not even have a tax hit to worry about.
GT99
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Re: Struggling Over whether to Sell my Tesla Stock

Post by GT99 »

I've followed TSLA very closely and am a huge fan of the company. And I would sell in a heartbeat if I were you. There is wayyy more downside risk than upside potential over the next couple years. At it's current valuation, it's trading at a P/E of about 40:1 of best case scenario 2025 earnings. Let that sink in. If the stock were to stay were it is now and everything goes pretty much perfectly, they would be at a 40:1 P/E in 5+ years. Great company, great vision, but total irrational exuberance around the stock.

Note: The base case scenario I'm referring to is around 30% year over year revenue growth (to around $100B in 2025) for 5 years AND a 10% profit margin.
jdb
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Re: Struggling Over whether to Sell my Tesla Stock

Post by jdb »

Been there done that. My investment in taxable account but have held for well over year so get LTCG. Now TSLA investment in seven figures. Recently sold enough at $500 after split to double my investment plus pay LTCG. Balance I am letting ride. I am long time Tesla fan, have been buying and selling stock at profit for years, despite naysayers, also have enjoyed driving the Model S past 8 years and Model X past 5 years, think it will be $1000 stock in future. But in any event now have more than recovered my investment, suggest you consider doing similar. Good luck.
Last edited by jdb on Tue Sep 15, 2020 12:30 pm, edited 1 time in total.
harikaried
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Re: Struggling Over whether to Sell my Tesla Stock

Post by harikaried »

goodenoughinvestor wrote: Tue Sep 15, 2020 10:52 amNow my stake is in the 6 figures and about 4% of my portfolio.
What percentage of portfolio was Tesla when you initially purchased? Perhaps you're more comfortable with that original percentage, so regular rebalancing can take away the emotional aspect when selling -- although would you buy when it got low as well?

Then again, potentially with a small target percentage to manage, we've just gone with simplicity and haven't had individual stocks. But for others, having some money available for this type of trading is better than none.
Jags4186
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Re: Struggling Over whether to Sell my Tesla Stock

Post by Jags4186 »

Another option is to look at your initial investment, see what it would have grown to in an index investment over that time period, and move that amount from your Tesla position into an index.

In other words, if your initial Tesla investment was $20k and now it’s worth $100k and instead had you put the $20k in the US total market it would be worth $30k today, sell $30k of Tesla and reinvest that into the TSM.
Last edited by Jags4186 on Tue Sep 15, 2020 12:34 pm, edited 2 times in total.
burritoLover
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Re: Struggling Over whether to Sell my Tesla Stock

Post by burritoLover »

x = pain you will experience if TSLA becomes worthless
y = pain you will experience if TSLA quadruples in value after you sell all shares

if x > y then
sell all shares today
else
hold forever
"it is always wise to expect the unexpected." - John Bogle
KlangFool
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Re: Struggling Over whether to Sell my Tesla Stock

Post by KlangFool »

OP,


My trading rule for the individual stock is self half (50%) when it triples (3X). If you do that, you can lose the remaining half (50%) and still make money.


KlangFool
jjface
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Re: Struggling Over whether to Sell my Tesla Stock

Post by jjface »

Don't listen to me I suck at stock picking and subsequently timing the sale. It looks too expensive to me so I would sell if I own it and wouldn't buy if I didn't own it. So yes it will probably quadruple in the coming months :annoyed

Sold Etsy at $14 after buying into the IPO and it is now $111 and in the S&P 500. I guess my initial feeling was right but couldn't take the heat. Also sold Apple too early. Like 5 years too early. Maybe I am just great at stock picking but need to stop selling :x Well all in index funds now.

I am sure there is a lesson in there for you but don't know what.
Last edited by jjface on Tue Sep 15, 2020 12:48 pm, edited 4 times in total.
mrtwstr
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Re: Struggling Over whether to Sell my Tesla Stock

Post by mrtwstr »

Sold mine, but only had a couple shares ;). Honestly too much action for me.
pasadena
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Re: Struggling Over whether to Sell my Tesla Stock

Post by pasadena »

If I had it in Roth, I would work out how much my initial investment would be worth today if invested in my "normal" portfolio. Then I would sell enough Tesla shares to cover that, put the proceeds back in my normal investments, and let the rest run.
jjface
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Re: Struggling Over whether to Sell my Tesla Stock

Post by jjface »

pasadena wrote: Tue Sep 15, 2020 12:48 pm If I had it in Roth, I would work out how much my initial investment would be worth today if invested in my "normal" portfolio. Then I would sell enough Tesla shares to cover that, put the proceeds back in my normal investments, and let the rest run.
I like it.
flaccidsteele
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Re: Struggling Over whether to Sell my Tesla Stock

Post by flaccidsteele »

goodenoughinvestor wrote: Tue Sep 15, 2020 10:52 amI didn't have any special insight to back up this notion, just a gut feeling which seemed like enough since I was "risking" such a minute portion of my net worth...I'm struggling over whether to sell (in Roth, so no tax issues)...The future of the stock is beyond my powers of prediction, obviously, but I'm struggling with two separate "tenets" of my investing approach: 1. Hold long-term/stick to my plan. vs 2. I should never have bought a single stock anyway so since I got lucky I should take the money and run.
Any advice on how to think about this?
The first step is that you need to accept that you’re not a passive index investor
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
harikaried
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Re: Struggling Over whether to Sell my Tesla Stock

Post by harikaried »

flaccidsteele wrote: Tue Sep 15, 2020 1:14 pmThe first step is that you need to accept that you’re not a passive index investor
Well, if we say OP originally purchased individual stocks at 1% of portfolio, overall it was 99% passive and now 96% passive. I suppose technically those are both not 100% passive, but they're pretty close. Or one could just say the "actual" portfolio is 100% passive and this side money has grown. :wink:
goodenoughinvestor wrote: Tue Sep 15, 2020 10:52 amI'm struggling with two separate "tenets" of my investing approach: 1. Hold long-term/stick to my plan. vs 2. I should never have bought a single stock anyway so since I got lucky I should take the money and run.
Assuming the long-term plan was to do passive investing, aren't these two aspects pointing to the same thing of your whim TSLA purchase turned out to be good timing, and going forwards even when TSLA grows, having total market weighting is good enough?
TNWoods
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Re: Struggling Over whether to Sell my Tesla Stock

Post by TNWoods »

I own several individual stocks, so I have no typical boglehead objection to that, but I wouldn't touch TSLA with a 10-foot pole. That P/E ratio is ridiculous, and they wouldn't be profitable if they only sold their product. They have to also sell hundreds of millions in tax credits to other car companies.

But, as long as all the irrational buyers are out there, the price can keep going up.

Consider this:

Calculate what your original investment would be worth if you had bought, say, VTSAX instead of TSLA back then. Sell enough TSLA to cover that amount, and buy VTSAX with it now. (Or whatever index fund you WOULD have bought if you had not bought the TSLA stock.) Now you are in the same position you would be in if you had stayed "true-blue-boglehead" back then, doing what every boglehead would have advised you to do back then...EXCEPT you also now have a bunch of extra TSLA stock! You can treat it like found money.

You could keep that extra "free" TSLA as it is, let it ride, see what happens, or sell covered calls for fun and profit, or sell and buy some other stock, all with impunity, because it is all extra, bonus money that you stumbled upon.

[OT comment removed by moderator oldcomputerguy]

TNWoods
MittensMoney
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Re: Struggling Over whether to Sell my Tesla Stock

Post by MittensMoney »

Tesla stock has won big, you should cash in! It's up 800% in the past 12 months -- do you think it'll go up another 800% in the next 12 months?! Highly doubt it. Individual stocks are close enough to gambling to use the saying "The longer you stay at the table the more likely you are to lose it all."
chicagoan23
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Re: Struggling Over whether to Sell my Tesla Stock

Post by chicagoan23 »

goodenoughinvestor wrote: Tue Sep 15, 2020 10:52 am I thought/think it is possible that it will become extremely valuable (a future Apple, Amazon etc.) and bought it with the assumption I would hold it long-term, maybe pass it to the next generation eventually. I didn't have any special insight to back up this notion, just a gut feeling which seemed like enough since I was "risking" such a minute portion of my net worth. Now my stake is in the 6 figures and about 4% of my portfolio.
Really what you have is an index fund portfolio with a slight tilt to whatever Tesla is (technology? consumer discretionary? industrial?). I would not want to let an individual stock get to 10% of my portfolio, but at 4% you can lose it all and not really feel much of an impact. Sometimes the "gut instinct" pays off, and it did for you here. Stick with your original thesis. Keep it all.
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Ramjet
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Re: Struggling Over whether to Sell my Tesla Stock

Post by Ramjet »

Sell 3/4 and let 1/4 ride for fun
Enzo IX
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Re: Struggling Over whether to Sell my Tesla Stock

Post by Enzo IX »

I sold my shares a week or two ago, got a quick double in a couple of months work.

My original plan was to hold for ten years or so and see where this goes, but it just went crazy and the stock chart went vertical.

I still believe in the company's long term potential but one can pay too much for anything.

Hoping for a substantial correction to buy back in. I'm gonna get a bad case of FOMO if it doesn't pull back in.
Normchad
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Re: Struggling Over whether to Sell my Tesla Stock

Post by Normchad »

I own a Tesla, and I owned Tesla shares. I sold my shares at $1800. I will have to, pay taxes.

If I were you, I would sell it all. If you want to sell half or something, that’s fine too. But I’d sell it all.
pasadena
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Re: Struggling Over whether to Sell my Tesla Stock

Post by pasadena »

Enzo IX wrote: Tue Sep 15, 2020 2:21 pm I sold my shares a week or two ago, got a quick double in a couple of months work.

My original plan was to hold for ten years or so and see where this goes, but it just went crazy and the stock chart went vertical.

I still believe in the company's long term potential but one can pay too much for anything.

Hoping for a substantial correction to buy back in. I'm gonna get a bad case of FOMO if it doesn't pull back in.
It went through a fairly impressive pullback last week...
Normchad
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Re: Struggling Over whether to Sell my Tesla Stock

Post by Normchad »

Ramjet wrote: Tue Sep 15, 2020 2:13 pm Sell 3/4 and let 1/4 ride for fun
This seems completely reasonable. A great option to consider.
FoolMeOnce
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Re: Struggling Over whether to Sell my Tesla Stock

Post by FoolMeOnce »

jdb wrote: Tue Sep 15, 2020 12:17 pm . . . think it will be $1000 stock in future . . .
How far into the future? At some point, doubling is not impressive.
Topic Author
goodenoughinvestor
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Re: Struggling Over whether to Sell my Tesla Stock

Post by goodenoughinvestor »

OP checking in: Thanks for all the good advice. Today, I sold half of my shares and have stopped thinking about it, so it was the right decision.
rubric2020
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Re: Struggling Over whether to Sell my Tesla Stock

Post by rubric2020 »

Thanks for the reminder. I just sold most of my TSLA as it was way overweighted in my portfolio (1/3 from increase over last 14 mos). Still have original amount and going to let it ride for a while.
srt7
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Re: Struggling Over whether to Sell my Tesla Stock

Post by srt7 »

You picked an excellent stock!
I would keep the equivalent of principal invested and sell the rest to realize the gains.
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illumination
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Re: Struggling Over whether to Sell my Tesla Stock

Post by illumination »

My vote would be sell a large part, or at the least put a trailing stop loss in.

Even if you want to make the case the company is currently priced at a reasonable valuation, is there really much potential upside left?

Right now the market cap is $419 Billion.
Ford is $27 billion, GM is $45 billion, Honda $46 billion, Toyota $217 billion
So Tesla is worth more than all these companies combined (with around $84 billion left over, so throw in a few more car companies like Nissan and Subaru )


And their only real profit so far is from mileage credits imposed by the government on other automakers.
https://www.caranddriver.com/news/a3234 ... 4-million/

What happens to the value of these credit when every automaker has their own electric vehicles they can use those credits for?


Nothing wrong with making a massive profit on a speculative stock, if it were mine, I'd sell or have a tight stop loss as bubbles can go even bigger before they pop.
WildBill
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Re: Struggling Over whether to Sell my Tesla Stock

Post by WildBill »

goodenoughinvestor wrote: Tue Sep 15, 2020 10:52 am I know there is another long thread addressing a similar situation but reading through it just increases my agita. In general I am an index-fund, passive investor. But last year when I had a bit of cash in my Roth I bought some Tesla on a whim. I thought/think it is possible that it will become extremely valuable (a future Apple, Amazon etc.) and bought it with the assumption I would hold it long-term, maybe pass it to the next generation eventually. I didn't have any special insight to back up this notion, just a gut feeling which seemed like enough since I was "risking" such a minute portion of my net worth. Now my stake is in the 6 figures and about 4% of my portfolio. I'm struggling over whether to sell (in Roth, so no tax issues). My overall portfolio is basically 55 index funds (and tesla)/and 45 cash (mostly CDs), so pretty conservative. The future of the stock is beyond my powers of prediction, obviously, but I'm struggling with two separate "tenets" of my investing approach: 1. Hold long-term/stick to my plan. vs 2. I should never have bought a single stock anyway so since I got lucky I should take the money and run.
Any advice on how to think about this?

Howdy

Sell half. Then you have taken productive action and no matter what are half right.
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid
petulant
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Re: Struggling Over whether to Sell my Tesla Stock

Post by petulant »

Maybe the plan is for all the Robinhood people to take out margin loans against their newfound wealth to buy Tesla cars, creating the profitability that keeps their investment intact. Will it work? Don't know.
flyingcows
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Re: Struggling Over whether to Sell my Tesla Stock

Post by flyingcows »

I would sell it all, I don't see any difference between buying Tesla stock or buying something like Pokemon cards/Bitcoin. Sure the price of any of these "assets" could move to any level, but at some point the people willing to pay more than you did will find something new to focus on.
bltn
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Re: Struggling Over whether to Sell my Tesla Stock

Post by bltn »

GT99 wrote: Tue Sep 15, 2020 11:40 am I've followed TSLA very closely and am a huge fan of the company. And I would sell in a heartbeat if I were you. There is wayyy more downside risk than upside potential over the next couple years. At it's current valuation, it's trading at a P/E of about 40:1 of best case scenario 2025 earnings. Let that sink in. If the stock were to stay were it is now and everything goes pretty much perfectly, they would be at a 40:1 P/E in 5+ years. Great company, great vision, but total irrational exuberance around the stock.

Note: The base case scenario I'm referring to is around 30% year over year revenue growth (to around $100B in 2025) for 5 years AND a 10% profit margin.
Excellent line of reasoning.
If I was really in love with the company, I might keep 10-15 % , and sell the rest. Really in love with it.
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Horton
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Re: Struggling Over whether to Sell my Tesla Stock

Post by Horton »

I set a limit order for what I thought was an “offer I couldn’t refuse.” It got executed.

It takes the guessing out. You don’t need to time it perfect. You don’t need to second guess whether to sell at 10am or 2pm.
ThePrince
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Re: Struggling Over whether to Sell my Tesla Stock

Post by ThePrince »

aristotelian wrote: Tue Sep 15, 2020 11:10 am Would you buy Tesla with $100k cash right now? Do you have any reason to believe it is worth more than the market thinks? If not, sell. You do not even have a tax hit to worry about.
+1
jello_nailer
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Re: Struggling Over whether to Sell my Tesla Stock

Post by jello_nailer »

illumination wrote: Tue Sep 15, 2020 6:26 pm My vote would be sell a large part, or at the least put a trailing stop loss in.
Nothing wrong with making a massive profit on a speculative stock, if it were mine, I'd sell or have a tight stop loss as bubbles can go even bigger before they pop.
+1 ^This. Tight trailing stop at 2% on 25% of it, maybe 4 or 5% on another 25%, etc. This is kinda what I'm doing with mine. For the last 50% if you have enough shares, sell the Oct 16 $550 Calls for $32 - with your luck it will run to $548 and you will pick up another $130 a share! Rinse, wash, and repeat. Good luck!

No one knows whats going to happen, but I do know no stock has ever been up 1200% without being up 800% first. Might as well let your lottery ticket run.
bltn
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Re: Struggling Over whether to Sell my Tesla Stock

Post by bltn »

goodenoughinvestor wrote: Tue Sep 15, 2020 3:48 pm OP checking in: Thanks for all the good advice. Today, I sold half of my shares and have stopped thinking about it, so it was the right decision.
I would sell half again.
Prettyfrtnt
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Re: Struggling Over whether to Sell my Tesla Stock

Post by Prettyfrtnt »

Hold till eternity. Future you already thanking me.
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