Wednesday, April 2, 2014

Falling Into The Trap...

One of the hardest things to decide when investing is when a stock has run it's course. What I mean is, you maybe bought a stock a few years ago and it's up 60-80% over that time, but in the past 2-3 months it hasn't really moved. It's plateaued.  An example is Microsoft (which I don't own at the moment). Back in the 80s ands 90s this was a millionaire maker. But if you look at it over the past 10 years, it's pretty much stayed between $25-$35/share.  During that time, if your goal was growth you didn't get much. But if you were one of the lucky ones who bought when it was less than $10/share, you were sitting on a nice return. A very nice return.  But you were sitting. In hindsight, you could have put that money to better use somewhere else. But it's scary to sell and miss any potential upside that might come (as it has in the last few months, moving over $40 for the first time in years). But hindsight is 20/40.

Chart forMicrosoft Corporation (MSFT)
The challenge is to recognize an extended stagnation period in a stock and move your money to other stocks with potential grown. You don't have to move it all, especially if you think there's a chance of a spurt. But I suggest you at least take your initial investment and some gain off the table, that way your playing with "house money" meaning, if it goes south you took some gain off the table, as well as your initial investment, so you really haven't lost.

This is on my mind because I'm sitting on a few stocks with some ridiculous returns (in all fairness, I've had some since the 2007 crash). I've moved some, buying Fannie Mae (FNMA) and GT Advanced Technologies (GTAT) as I've mentioned in recent posts. Both are up as of today.  But I have to do more. I have several stocks with 3 figure returns that aren't moving like they once did. I'm not necessarily going to cash out totally, but I need to diversify.  I'm still seeing new housing going up on my way to work, and I still think there's about to be a housing boom (not bubble).  Interest rates are still low, and the economy is picking up steam, regardless of what some would like you to think. So, gotta get out of the trap.