Author Topic: Speculative stock investment - when to cash in  (Read 944 times)

frugaldrummer

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Speculative stock investment - when to cash in
« on: August 03, 2020, 09:38:29 PM »
Recently I did something unusual for me - I put $10k ( only 2% of my total investments) into a speculative stock, based on some specialized knowledge I have about its product. (NOT insider knowledge, just a field I know something about).  I didnít invest more than I could afford to lose, and so far, it has almost doubled in price in a short time. Since I never really do this though, Iíll admit I didnít have a firm end in mind. My general plan is to sell half to recoup my original investment, and let the remaining $10k ride unless I see a reason to lose confidence in their product. If itís successful, that remaining $10k might increase up to ten fold; if it fails, I could lose all $10k but would be no worse off than when I started because Iíve recouped the original investment and didnít tie it up for very long (about 4-6 weeks).

Does this seem like a reasonable way to think about it? I knew it was a risky investment when I made it, and am willing to cut my potential long term gains in half in exchange for recovering my initial investment. Give me your viewpoints .

moof

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Re: Speculative stock investment - when to cash in
« Reply #1 on: August 04, 2020, 12:20:49 AM »
Generally asking random strangers on the internet for validation of your investment scheme is a poor one.  That said, if you keep your ďTry and beat the indexĒ sandbox to a small portion of your portfolio, then have fun and enjoy the ride.

Feivel2000

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Re: Speculative stock investment - when to cash in
« Reply #2 on: August 04, 2020, 01:30:16 AM »
It is gambling. And you accepted the risks.

"Take the bet from the table and let the rest figure it out." is as okay as any other gambling strategy.

I did the same with Wirecard (my bet was only 100Ä...). The important thing is that you don't believe that you are some investment genie, who could win this bet again and again.

frugaldrummer

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Re: Speculative stock investment - when to cash in
« Reply #3 on: August 04, 2020, 02:34:43 AM »
No I certainly donít intend to make a habit of it.

Roland of Gilead

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Re: Speculative stock investment - when to cash in
« Reply #4 on: August 04, 2020, 05:48:39 AM »
If you have that itch to try and beat the market, you could do something similar to what I have done:  Take a small amount of money and put it in a low or no cost brokerage and only "play" with that money.

I did this 2 years ago with $2,500 and it has grown to $33,000.  I have a thread about it on this forum but it doesn't get a lot of traction....mostly people are adverse to this type of thing even with the small starting amount and containment of the activity.

DalioGold10

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Re: Speculative stock investment - when to cash in
« Reply #5 on: August 04, 2020, 06:18:51 AM »
If you have that itch to try and beat the market, you could do something similar to what I have done:  Take a small amount of money and put it in a low or no cost brokerage and only "play" with that money.

I did this 2 years ago with $2,500 and it has grown to $33,000.  I have a thread about it on this forum but it doesn't get a lot of traction....mostly people are adverse to this type of thing even with the small starting amount and containment of the activity.

True.
I also enjoy to play the Buffet's game with 10% of my portfolio :)

Fishindude

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Re: Speculative stock investment - when to cash in
« Reply #6 on: August 04, 2020, 06:34:39 AM »
Most folks I know that trade individual stocks frequently have some type of personal investment strategy, such as:
If value increases XX% I sell and take the winnings.
If value decreases XX% I sell and cut my losses.
They keep emotion out of it and stick to a strategy.

Roland of Gilead

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Re: Speculative stock investment - when to cash in
« Reply #7 on: August 04, 2020, 06:49:18 AM »
Most folks I know that trade individual stocks frequently have some type of personal investment strategy, such as:
If value increases XX% I sell and take the winnings.
If value decreases XX% I sell and cut my losses.
They keep emotion out of it and stick to a strategy.

I think applying a rule set like that is why so many of them fail.

I sell when the potential profit is not enough to offset the risk of holding.

To me it does not make sense to sell a stock just because it falls in price below a certain point without looking at the reasons behind the drop and the risk/reward ratio.




DalioGold10

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Re: Speculative stock investment - when to cash in
« Reply #8 on: August 04, 2020, 08:06:20 AM »
Most folks I know that trade individual stocks frequently have some type of personal investment strategy, such as:
If value increases XX% I sell and take the winnings.
If value decreases XX% I sell and cut my losses.
They keep emotion out of it and stick to a strategy.

I think applying a rule set like that is why so many of them fail.

I sell when the potential profit is not enough to offset the risk of holding.

To me it does not make sense to sell a stock just because it falls in price below a certain point without looking at the reasons behind the drop and the risk/reward ratio.

The best rule is: If you are a value investor and you estimate the intrinsic value of the share, than when stock is above 10%-30% your valuation, sell (mark profits), if down then buy :)
Of course re-asses the intrinsic value frequently based on important changes, e.g. interest rates, company's quarterly earnings etc.

jjandjab

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Re: Speculative stock investment - when to cash in
« Reply #9 on: August 05, 2020, 09:47:58 AM »
Does this seem like a reasonable way to think about it? I knew it was a risky investment when I made it, and am willing to cut my potential long term gains in half in exchange for recovering my initial investment. Give me your viewpoints .

I think very reasonable. You invested a small amount in a smart way - using your personal knowledge to create a good return.

But the other way to "play it" - assuming you think the stock still has potential - is to set a stop loss order, good until cancelled, above your original investment price. Let's say you bought at $10 and it is now $20. Why not keep it all in there to potentially further increase your gains, but set a stop loss at $12. Then you still make 20% or so and get your original money back if it falls quickly. On the flip side, if it goes to $30, then you've got a higher return and you could then increase you stop loss as it rises more, say to $15 or $20. Just a thought on an alternative method to protect your gain and possibly increase future returns.

MustacheAndaHalf

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Re: Speculative stock investment - when to cash in
« Reply #10 on: August 05, 2020, 10:29:18 AM »
@frugaldrummer - Why is this investment overvalued?  Why sell?

If it's not overvalued, you might be treating your purchase price as overly significant.
https://www.investopedia.com/terms/a/anchoring.asp

hodedofome

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Re: Speculative stock investment - when to cash in
« Reply #11 on: August 05, 2020, 01:21:42 PM »
What is the stock you bought?

BicycleB

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Re: Speculative stock investment - when to cash in
« Reply #12 on: August 05, 2020, 03:11:13 PM »
Mostly PTF.

To earn my keep - OP, it sounds reasonable, but are you in an income bracket that pays tax on capital gains? If so, the amount you sell will be taxed. You might sell a little extra to cover the tax.