| By :
Brian Fricke
Copyright (c) 2010 Brian Fricke Do you have a stock – a favorite company that you are partial to — that you don’t want to get rid of regardless of what all the research or tea leaves might be indicating? We call this stock a legacy holding. If you have this kind of relationship with a favorite stock or two, then read on for some advice on how to make money – or at least limit your losses! Our general rule is that if you’ve got a small sum of money and you want to play, that’s fine – as long as you’ll be “okay” if you lose most or all of your investment. Whenever you have money in a stock, it’s important to look at how much money is involved. If it’s not “life changing money,” even if the stock doubles, triples or quadruples in value, and it is causing you unnecessary worry or anxiety, maybe the better approach with that stock would be to get it out of your life. It’s always good to eliminate undue stress and worry when something is not bringing you joy and satisfaction. If you’ve got a favorite legacy stock that’s made you a lot of money in the past, you need to remember that this is no guarantee that it’s going to do it again in the future. The best way to make money with your favorite stock is to not get emotionally tied to it. Know and understand that your favorite stock is going to rotate in and out of favor with the market. This doesn’t mean the company is going under or not going to continue to be profitable. But if you reach the point where you’re “losing money” or “not doing as well as you could be,” it could be time to sell. A supply and demand investment system (like ours) can tell you if there appears to be enough ‘demand’ in the marketplace for your stock that’s going to lead to above market returns. If not, maybe a better approach is to sell that legacy stock. The most common objection we get to this advice is, “I made all this money, I’m going to get killed on taxes I really don’t want to take the tax hit.” However, there’s a time to be invested in a stock and then there’s clearly a time when it makes sense to step to the sidelines. If you stick with some stocks long enough, you’re going to watch the stock price go down to the point where you’ve either lost money or you feel a significant loss on profit. It’s all about the market forces of supply and demand. It doesn’t mean your favorite stock is bad or mismanaged. But based on a supply and demand system, there may be better opportunities elsewhere. And shouldn’t that be where you put your money?
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