That Old Mantra

Wednesday, 22nd April 2009 12:20 - by Boredmum

You have probably heard the mantra ‘Cut your losses and let your profits run’. I have read that quote several times. It may be good advice but I find myself doing the opposite. It can be hard to sell at a loss and human reaction makes it a difficult thing to do but that is not my reasoning. I’ll give you an example, I was holding PartyGaming shares (TIDM code: PRTY) and I had purchased them at a price of 280p in June 2008. I held them and watched them fall; eventually I sold out at 165p in January. Just 2 months later the sp was sitting at 255p. So should I have sold them at a loss or waited for a (potential) recovery? I also find now that when a share moves into profit, I tend to sell it. As we know nothing ever moves up in a straight line, so when a share rises and I move into profit and see signs that it may drop off then I sell it. I think it comes from suffering losses last year. I am probably slightly nervous and as they say ‘It is not a profit til it’s banked’. There are a couple of personal examples of exceptions I have to this behaviour. One is Tower Resources (TIDM code: TRP) and the other being Toledo mining (TIDM code: TMC). For both these shares I intend to let them run as I have expectations where I truly believe them to have much higher value, so I’ll ride the waves without going in and out. How do you play your shares? Do you have strict stop losses? Do you let your profits run? It would be good to hear what works for you.