Guide to when to sell next time around?

[Dennis]

from J. Waggoner:

Investors in specialized funds need to know when to sell - USATODAY.com

I think is Decent advice on when to sell your Special sector ( Spec) funds..
It's what I've been using for several yrs in both Stocks and Funds that are more volatile.. Like:

Int'l
Bull and Bear Funds
my top 5 stocks of my Funds I buy on Margin

I don't sell My other funds that are more Diversified into many Sectors/Classes , unless they start showing "going Flat" or not doing anybetter than indexes..then it's usualy due to them getting just too big or change in Mgmnt.. and time to move on.. or in funds like CGMFX, auto sell when goes down -20%...auto sell whe it's Reit, CGMRX goes down -10%..which was triggered in Oct 5 wk.....guess I should have done the same sell guide for ALL my Funds, not just the Volatile ones...Oh well, live and learn...Buy and Hold no matter what? Not anymore My friend, not anymore..

Excerpt from his Aritcle:

"Now, if you like to speculate — and there's nothing wrong with that — then feel free to invest in highly specialized funds. But make some rules for selling before you buy. Most selling guidelines won't protect you from all losses, but they will help protect you from catastrophic plunges.
For example, if you invest $10,000 in ING Russia and lose $1,000, you'll feel foolish, but your account will live to fight another day. A 10% loss requires an 11% gain to get back even.
Lose 50%, however, and you'll need 100% to get whole again. So how do you decide when to sell?"

excatly what I did with Mathews China Fund.. once it hit -20%, sold.. and same for my Latin Fund PRLAX and my Recently purchased in April, BEAR Fund is set up to sell automatically when drops -20%...

And what do you use as a guide of when to sell them?

[. . . Yrs to Go]

If I were inclined to speculate and jump in and out of the stock market, the dead give away this time was the fact that the credit markets train wrecked a good week or two before the equity market.

As far as what the dead give away for the next equity market crash will be . . . I'll tell you after it happens.

[. . . Yrs to Go]

BTW, if you implement a "good" sell rule, you're going to need a "good" buy rule too. My guess is that your sell rule is going to be pretty close to my buy rule . . . so thanks for the discounted shares in advance.

[Architect]

If you do anything other than blind buy and hold, there isn't any one rule that will always work.

This one was easy. The parallels with the 30's were out in plain sight for two years at least. Free loans to people who can't afford houses? Please ...

I missed the dot.com - it was my education in stepping out of the way of a bust. But I know many people who did see it, and if I knew then that I know now it would have been easy to spot too. Pets.com ...

The previous post war busts were harder I think, except some of them in the 70's perhaps. Those busts, being bumps in the road mainly, were 'V' shaped, and so you were in the bust too quick to catch them usually.

I don't have a good sense of the lead up to the 1930's bust or earlier, but I imagine that one wasn't too different from this, from what I understand.

Gary Shilling makes a speciality of watching out for busts. He wrote a paper once on the buy/hold approach versus getting out before a bust than back in. I haven't seen the paper but it shows that even stepping out too early - a likely scenario - you still are way ahead of sticking it through. At any rate Shilling got his clients out of the dot.com, and gave perfect warning on this one too.

He also gave great advice on how to do well in it - Treasuries for ordinary mortals. He, having an investment company, was able to buy a derivative that soared 600% on bad subprime debt. But Treasuries have been the only asset class to appreciate this year, 20%+ on the long bond.

[youbet]

Quote:

Originally Posted by Architect This one was easy. The parallels with the 30's were out in plain sight for two years at least. Free loans to people who can't afford houses? Please ...

So...... How about right now? Are we headed down to DOW 6000? Leveling here? About to start working our way back up?

Congrats on you nifty call on this one and going to long Treasuries. But, what about now? When are you going to get back in, if ever?

[Architect]

Million dollar question - literally! Investing for the downturn was easier than investing for the next upturn, at least at this point. Well, here's my thoughts for what they're worth ...

2008 is a washout. Traders usually goose December to make for a cushy bonus. They did last year, the beginning will probably get marked as starting in December 2007, and it was funny to see all the really terrible news coming in a year ago while the markets blithely stayed elevated. But come January 2nd all hell broke loose (maybe they gave it a few days into the new year ...) So I would guess that, if I was a trader, I would, if anything, make 2008 more punishing. Get it all out - it's a lost cause already, just shoot the horse. If anything, pushing things below 'fair value' , whatever that is, will set up for the possibility of a recovery of some sort in 2009, it's easier to have good returns if you start from a lower point. And then, new year, new administration, who knows ... Obviously anything can happen, but my best guess is that 2008 will end badly.

So I'm very tempted to start DCAing back in starting in December. I'm presently planning on doing so if things keep the same or get fast worse. If there's a rally, then it's just more of the same, and I'll sit on my hands as the market is setting up for a fall again, in my small opinion. The other possibility is that it is back to depression returns and stocks keep sinking until they're 80%+ down. My SWAG is we'll see 65%-75% total. I'm happy to throw away some upside to avoid downside, so I'm cautious here.

With the Treasuries I'm waiting still because there's two things playing out. One is deflation, TIPS are pricing in a decade of deflation, Treasuries have been for some time, and stocks are finally getting a clue. Even before outright deflation, if it occurs (we're already 'enjoying' asset and credit deflation), I think there's a good possibility of the Fed buying up the yield curve. They did this in the 40's, and threatened to do so in early 2000 with quantitative easing. They're already doing all this exotic action (buying junk securities), and it's been pushing on a string. They've lost control - sure they can reduce the Fed Funds rate to 0% - ZIRP, but so what? It's already down there without the Fed help. It's may not be long before they have to buy longer Treasuries, or simply threaten to, which would have the same effect. So either way I think there's still some distance to go with the yield curve.

I'll buy a house again probably in 2010 when that bottoms, or is close to bottoming.

Ultimately the world economy will flourish and grow again, but there's a hard winter we have to get through first.

Quote:

Originally Posted by youbet So...... How about right now? Are we headed down to DOW 6000? Leveling here? About to start working our way back up? Congrats on you nifty call on this one and going to long Treasuries. But, what about now? When are you going to get back in, if ever?

[quietman]

The easiest rule is always sell before a 20% drop. It's also a good idea to sell before 30% and larger drops.

[youbet]

Quote:

Originally Posted by quietman The easiest rule is always sell before a 20% drop. It's also a good idea to sell before 30% and larger drops.

I'm with you. Next time I look at a chart of the S and P and it shows a serious drop in the near future, I'm bailing out! BTW, where do you find that future chart? All the ones I'm familar with end with yesterday's data and, darn it, you have to wait until tomorrow to get today's data. :confused:

[. . . Yrs to Go]

Quote:

Originally Posted by quietman The easiest rule is always sell before a 20% drop. It's also a good idea to sell before 30% and larger drops.

The flip side of Will Rogers advice to "Only buy stocks that are going to go up. If they aren't going to go up, don't buy them."

[CyclingInvestor]

I sell when stocks I hold become overvalued (IMO) compared to the other stocks I track, using the proceeds to buy the relatively undervalued stocks. I cannot imagine selling because the price goes down, although I might sell a stock with a depressed price if the fundamentals have dropped even faster.

[chinaco]

The article has some good points. Regarding the sector funds (being for trading). If one has a slice and dice diversified approach and intend to rebalance themselves these funds can be useful. But to do that... one needs a long time horizon (e.g. 10 years) and one needs to be disciplined.

Buying heavily into the market after it has made its made several sizable moves... If you are late to the party... then don't get too greedy... being a bit more short-term oriented makes sense.

[OAG]

I have invested very little in the Stock Market (everyone knows I have been accused of "loving" my CD Ladder). But when I did some years ago I always used the down 5% OUT and up 20% OUT rule for me personally. I used this rule for both individual stocks and MF - worked for me as I was very smart OR I was very lucky (I suspect more luck than any smarts on my part) and never lost money. I always thought people are somewhat quicker to pull the DOWN trigger but VERY reluctant to pull the UP trigger. I guess we tend to believe what is good will get better and what is bad will get worse. Probably over simplification but whatever works.