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Doesn’t It Make Sense To Take Profits? At Least Some?

24 August 2009 No Comment

For those of you who have ridden the stock market up 50% from the lows earlier this year have done well!  Congratulations!  My question to you is: at this point, doesn’t it make sense to take at least some profits?  50% in a matter of months is a HUGE move.  Even if you are down from where you were a few years ago, don’t dismiss the fact that this has been a monstrous move in a short period of time.  Profit taking is never a bad thing.

It’s so interesting how many people said things like, “If the Dow hits 9,000, I’m gonna cash everything out.”  We are well over 9,000 and most of those people have not cashed anything out.  Why is this?

We all know that we are to buy low and sell high, but the market creates emotions that make us do the opposite, which is why so many people lose money investing on their own. 

When you should have been buying, back in March, your emotions were telilng you to stay away.  Your emotions usually tell you to do the opposite.  What are your emotions saying today?

Moving In And Out Of Positions In Chunks

I’m not trying to tell you to cash out completely.  I don’t recommend selling 100% of your position rarely ever.  I like to move both in and out of positions in chunks, typically in thirds.

Getting back to today’s market, if you are still a believer in the green shoots or in the rebound story of the U.S. economy, then fine, continue to be a believer.  But, for goodness sakes, scale back your positions by a third and lock in some profits.  Remember, paper profits are worthless.

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