First, don’t panic. I’m prudent with 98% of my investments and max out the 457, 403b, IRA, plus vanilla after-tax index funds with the little bit leftover. But, awhile ago I started playing around with a few speculative stocks, just as an experiment (and an understanding that I may lose the money). I bought into three companies; of those my investments grew (and shrunk) by 289%, 93%, and (33%). When I bought I did not have an exit strategy.
I plan on holding the biggest gainer and the biggest loser. The middle guy (CRUS) I’m thinking of selling 50% to recoup most of my initial investment. I read somewhere that investors shouldn’t sell unless there was a better buying opportunity elsewhere or if you have reason to believe the stock is a risk. Apple accounted for 78% of CRUS’ revenue last quarter. This seems risky to me. If I do sell, I will just scootch the profits over to the index funds accounts.
We’re talking about a small amount of cash here (selling 50% would net ~$2,000). Conceptually though, does it make sense to sell when the stock has nearly doubled and the biggest customer is a behemoth company that would tank your investment if they went with another supplier? It seems like recouping the initial investment makes sense at this point. If the stock goes up or down or sideways afterwards I could be indifferent about the fluctuations. But paying taxes on the sale on income I’ve already paid taxes on doesn’t seem wise either. Argh, how to do you seasoned experts decide when to sell?