Never Regret Making a Profit

It is easy to agonize over the sale of a stock with a big capital gain in it, because it could always go higher.  But selling at a profit is never a bad thing.

All it takes to destroy your gain is a few bad news reports.  That can happen with no warning and research might not completely immunize you against the possibility.  Enron’s stock closed at an all-time high of $90.56 in the year 2000.  By the end of 2001 it was trading at $0.26.  Not long before this happened analysts were singing its praises as a highly innovative and successful company.

In May I sold a position in Cisco Systems (Nasdaq: CSCO) for $54.36 per share.  It was purchased in September, 2015 at $25.53 per share.  That is about a 113% percent profit even before dividends.  Adding in roughly a roughly 3% dividend per year the profit is something like 122%.

The reason for selling was that the profit was high and I wanted to preserve it.

Last December I sold a position in 3M Company (NYSE: MMM) for $193.33 per share.  It was purchased in September, 2015 for $140.80 per share.  That is a 37% profit before dividends.  Add in a roughly 3% dividend over a little more than three years and you end up with a profit of 46% or so.

The reason for selling was that I had a lot of tax deductions in 2018.  It was a good year to realize more income.  The market was showing fear in December, 2018.  But despite that I still had a large gain in the stock.  My feeling was the panic would be temporary and that the stock would come back.  But if I waited until 2019 the deductions would be lost. And it seemed if I waited until after the Fed announcement later in the month the market would get worse, because it seemed likely they would raise rates.

It turns out I was right: they did raise rates and the market did decline further. So in that sense it was a good decision.

Since both of those transactions results have been mixed.  Cisco trades higher today close to $56.00 a share.  3M trades lower today around $174.00.

In the interim Cisco traded up to around $57.00 and 3M up to around $219.00.  So there are doubtless analysts out there who would say I made bad calls.

But seller’s remorse is a fool’s errand.  Nobody can really call the stock market with a fine point of accuracy.  There are only people who try to act like they can.  The most successful investors in the world make decisions based on the best information they have at the time and wait to see what happens.  If you make money on a trade feel good about yourself and start looking for the next potential opportunity.

 

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Articles presented here are general opinions for your own consideration. They are not specific advice for any one investor.

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