A WORD FROM THE AUTHOR: I hope everyone is having a good week. It’s been rainy in Los Angeles this week but it’s always refreshing to get some thunder and lightning. This week, I decided to sell off some of my stock assets and reap the seeds I planted when the recession began. I want to note that your decision to sell only applies to your personal trading account (like Robinhood, Public, Bitcoin) and not your retirement account. As always, I’m not a financial advisor and encourage you to do your own research when possible.
Tech and Bonds
Tech stocks were sold off this week and this sector has seen red as bond yields continue to rise. This week, President Biden’s $1.9 trillion stimulus package led bond yields to increase to 1.61% from 1.52%. For a refresher on bonds, they are a tradable asset that acts as a simple I.O.U. They should be found in your portfolios (401K, IRA, etc.) and are considered a safe alternative to stocks.
Bonds ensure that you reap your percentage yield with no questions asked. While the stock market may fluctuate, you can sleep safely at night having bonds in your portfolio.
A yield percentage increase in bonds signals that the economy is recovering and investors are looking to secure additional gains by shifting their money from the fickle stock market to faithful bonds.
Sell, Sell, Sell
I invested in tech stocks like Apple, Google, and Microsoft last year. One year later, I’m having trouble on know when to sell. I’m telling myself these stocks will continue to go up even after a 2,000% increase (hypothetical). This isn’t a great measure of when to sell your stock because greed begins to set in. Note, this
When it comes down to it, your decision should sell should be based on the facts and equations. Never give in to your emotions when dealing with stocks.
The Equations and the Valuations
From Investopedia, you should have the valuation of the company at the forefront of your mind at all times. If you’ve done your research and truly believe a company is undervalued, you could see a great return in your future. That’s what investing is at the heart of it.
The left-brained side of this dilemma should consider the recent history of the stock performance. I ask myself how the stock has performed within the past 3 to 6 months. If I’ve made a significant profit and I’ve taken a hit during this timeframe, I typically sell half of my investment. This ensures I keep my profit while staying in the game.
Pro-tip: Analyze the stocks past and future to best decide when to sell
The Right Brain and the Emotions
Losing sucks. Nobody wants to lose money on an investment they believed in. The best thing here is to not give in to your emotions. When I bought Affirm stock (AFRM) at the IPO, I was so excited to see innovative tech making its way into the public exchanges. I bought as many shares as I could, telling my friends, “Give it a few years and this is the new Amazon or Tesla.” Three months later and I’ve lost a moderate percentage of the investment.
I’m frustrated and furious but I won’t sell the stock for a loss. Unless you need the money now, never sell for a loss. This defeats the whole purpose.
My next step is to buy more of the stock at a lower price so that I can dollar cost average my loss.
Pro-Tip: Never sell for a loss
Take the Money and Run
As a reminder, you do have to pay taxes on your sold stock when you file your tax return the next year. The law encourages you to hold stock for more than a year by lowering the government’s tax cut after 365 days. If you sell within a year, be sure to set aside 30% of your profit for taxes.
Happy selling and buying! Have a great week.
-Jordan