When to sell your stocks

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I sold some stocks recently. Not only I didn’t loose any money, but I actually made some. If you have been reading the news, you are aware the markets are in correction territory, a.k.a. bearish. It resulted in massive sell-offs across the globe.

A BEAR MARKET IS NOT A REASON TO SELL YOUR STOCKS

Bear markets are actually pretty normal. They should be expected. The twist here, is that we are no longer used to them. We have been in the longest bull market in history. Most of us have forgotten what the bear looks and feels like.

That being said, there are definitely valid reasons to sell your stocks. Here are a few of them.

you need the money; your stocks are all you have

Yep. Shit happens. If your cash is depleted, your credit cards maxed-out and you are in a dire situation, then sell away.

If you are not at this stage, consider using cash, liquidating term-deposits or selling your bonds before selling your stocks, particulalrly if the markets are bearish.

your stocks have served their purpose

When buying stocks, one should always have an objective. Whether short or long-term or for speculation or diversification, your stocks should always have a purpose. Once achieved, your stocks have no reason to be in your portfolio anymore.

you experience major life changes 

You loose your job; you go through a divorce or you are nearing retirement. These types of change may require rebalancing your portfolio to a more conservative allocation.

your risk tolerance is drastically lower

A major life change and ageing will lower your risk tolerance.

I always say it is important that your portfolio be in line with your risk tolerance. Most of us have a lower tolerance than we initially claim. Case in point with the recent mass sell-offs….

ONE OF YOUR STOCKS IS CONSISTENTLY UNDERPERFORMING

We all make mistakes, including with our investments. A stock has been in your portfolio for some time, and it is just not picking up when similar stocks are rocking the market.

When the market becomes bearish, your stock becomes worse when similar ones weather the turmoil. Time to sell!

MY CASE

As I mentioned above, I recently sold some stocks. These stocks were in my TFSA for a few years.

They were part of my emergency fund. Yes, you are reading correctly. Back then EQ Bank and Tangerine had not launched their high-interest savings accounts. The majority of banks was offering peanuts in term of interests.

I have had major life changes recently, with more coming. I needed to rebalance the allocation of my emergency fund. So, I sold some stocks. I made money despite the bear market. I sold stocks that triggered a capital gain. I still have 20% of stocks in my portfolio.

 

 

Book review: Stock Investing for Canadian for Dummies

 

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My first introduction to investing was horrendous, to say the least. It took me many years to finally take the plunge -into the stock market- and become a DIY investor. I certainly regret taking so much time to do so, as I have missed on, on one of the longest bull market in history.

When I decided to educate myself on stock investing, I bought the above-mentioned book, written by Andrew Dagys and Paul Mladjenovic. Dagys is a Chartered Professional Accountant (CPA) and Mladjenovic is a Certified Financial Planner (CFP). I can safely write these two know what they are talking about!

the “dummies series” REGULARLY gets updated

This is one of the reasons I bought this book. It is currently at its 5th edition so you do have up-to-date information.

the book uses plain and simple language

Another good reason to read this book is that it does not confuse you more, quite the contrary.

The book uses plain language and gives a lot of tips, examples, references and resources.

the canadian twist is nice

There aren’t that many personal finance books for Canadians. It is good to read a book that talks about the Canadian Financial landscape. Although stock markets operate the same way everywhere, the tax implications and investment vehicles vary from country to country.

 if you are not a novice, this book is not for you

If you already know the basics of investing, you won’t learn anything new here.

final word: buy

I give this book a definite buy. It is the perfect and easiest way to get started with stock investing!

 

 

 

 

 

 

 

 

 

 

 

Understanding a stock table

One of my plans for 2016 is to learn more about stock investing. It can look intimidating, but it is actually not rocket-science. You need to research the companies you want to buy stocks from and you need to understand the stock table.

There are a few additional steps you also need to do, but these 2 are the basics to get you started.

Here is an example of a fictitious stock table:

52-Wk High 52-Wk Low Name (Symbol) Div Vol Yld P/E Day Last Net Chg
21.50 8.00 ABC Corp (ABC) 3143 76 21.25 +.25
47.00 31/75 DEF Corp(DEF) 2.35 2735 5.7 18 41.00 –.50
25.00 21.00 GHI Corp (GHI) 1.00 1894 4.5 12 22.00 +.10
83.00 33.00 JKL Corp (JKL) 7601 33.50 –.75

Here is what each column means:

  • 52-week high: This column gives you the highest price a stock has reached in the most recent 52-week period.

  • 52-week low: This column gives you the lowest price a stock has reached in the most recent 52-week period.

  • Name and symbol: This column tells you the company name (usually abbreviated) and the stock symbol assigned to it. The symbol is also called ticker.

  • Dividend: A value in this column indicates that payments have been made to stockholders. The amount you see is the annual dividend quoted as if you owned one share of that stock.

  • Volume: This column tells you how many shares of a particular stock were traded that day. If only 100 shares are traded in a day, the trading volume is 100.

  • Yield: This column refers to what percentage that particular dividend is to the stock price. Yield  is calculated by dividing the annual dividend by the current stock price.

  • P/E: This column indicates the ratio between the price of the stock and the company’s earnings. This ratio (also called the earnings multiple or just multiple) is frequently used to determine whether a stock is a good value.

  • Day last: This column tells you how trading ended for a particular stock on the day represented by the table. Some newspapers report the high and low for that day in addition to the stock’s ending price.

  • Net change: This column answers the question “How did the stock price end today compared with its trading price at the end of the prior trading day?”.

If you invest for dividend income, the yield (Yld) is an important number to look at. The yield should be at least 3% if you are looking for income.

If you are looking for growth, the P/E is a good start.