The dilemma of when to sell

The dilemma of when to sell

Numerous articles/comments/views have been shared by so many stock gurus - local and abroad about when is the right time to sell shares. Many times, I have also been asked by my friends/followers when is the correct time to sell their shares especially those with some profit margin to cash in.

I wish I have a super crystal ball to show me so that I won't have to worry of the potential headache should I advised them to sell and only to see the share price rising further ahead.

Most of investors must have experienced this before. If you have been following my blogs since day one, I am sure you will know that three of my previous stocks, Hup Seng Industries Berhad, Keck Seng (M) Berhad and Pharmaniaga Berhad went on to scale new highs again and again AFTER I had sold them off for an already superb profit.

The potential headache occurs when our share starts to record higher and higher paper profits. While one is thrilled to see its share gaining higher paper profits, one is also in a dilemma.

What if the share price starts to experience massive profit taking and hence the paper gain would be retreating back again?

What if the share price experiences a sharp u-turn suddenly and retreat back to its original price? Or worse still, below its original price!

What if after selling the share for a profit, the share continues to ascent even higher to new records high?

Such is the dilemma for EVERY INVESTOR when there is paper profit to be realised. Such is the peer pressure to take profit when there is opportunity to do so that in my survey among my group of investors, many are likely to lock in their profit at around a 10-30% gain.

On numerous occasions, I congratulated them for their 10-30% profit and I poked this simple question : Why are you taking profit at this level? The  answer is : A 10-30% margin is a good one! Well, my fellow friends, there is no right or wrong once you have realised a profit from your investment.

An investor with this type of mentally thinking will never experience massive major profit because he never allow the share price to possible scale new highs again and again. How many of us has experience MORE than 100% return from its investment?

For one to be able to achieve a MORE than 100% return, one must have that strong heart of steel to hang on to its running winning stocks for long periods. During those periods, there were bound to be the share price pulling back due to profit taking or market correction or even a poor quarter earning result. Even with continuous excellent quarterly results, the rising share price will also experience occasional pull-backs due to various factors, internal or external ones.

Personally when I buy a stock, I do not aim for a 10-30% return. I aim for 50-100% or more because I believe winning a few bigger and massive amount  of wins are better than trying to win several 10-30% returns. But that is easier said than done.

As I said earlier, to achieve that kind of massive returns, one must possess the hearts of steel and sadly very few have that. The fear of paper profit turning to paper loss is enough to prompt many to take profits as quickly as possible even though the profit realised is only a 10-30% range.

Focus Lumber's share price in new territory

Of late, my 2015's most favourite stock, Focus Lumber Berhad has seen its share price inching up higher by the weeks and is now at near its all time high of RM2.50 plus minus range. (I hope I am right about this).

My average cost price per Focus Lumber share is around RM1.50. So at this stage, my paper profit easily exceeded 60% should I decided to give my remisier a call to sell.

Am I excited about this? I would be telling you a lie if I say I am not. Yes, I am feeling excited about the rising share price of Focus Lumber. I have many reasons to feel so.

When I first started to invest in Focus Lumber and more subsequently, I was actually placing my reputation at stake as I know many of my friends and followers would also be buying this share as well following my articles about Focus Lumber.

I would never know if any of my friends/followers have bought more than me. Only they know themselves and they would not be telling me less I ask them for "ang pow" should they profit tremendously from Focus Lumber later. (Seriously I was just joking about that statement only).

A few have told me they have taken profit before the share price crossed the RM2 mark. Some had sold a certain portion of the shares along the way. Some are still with me. A few have reminded me that should I sell, they want to be the first to know. Some have jokingly said they would take profit when it touched the RM2.50 mark. Well, it crossed that price on Nov. 11, 2015. (I am wondering if they are true to their words).

By the last week of Nov, Focus Lumber should be announcing its 3rd Qtr results. How would it turn up to be? But judging from its sharp run up price, investors must be confident of another set of good results, hence the strong buying interest that pushed up the price.

Until then, let us wait and hope.