Selling Checklist: Take Most Profits At 20%-25% | Summary and Q&A

TL;DR

Take most profits at 20-25% to grow your portfolio substantially, as history shows that stocks tend to pull back after reaching this point.

Key Insights

• 🥡 Taking profits at 20-25% helps avoid potential pullbacks and corrections in stocks.
• 🔐 Selling at this point locks in gains and acts as a profitable insurance policy to avoid losing profits during market fluctuations.
• 😥 The 20-25% gain should be calculated from the ideal buy point, rather than the actual purchase price to ensure the sell point is accurate.
• 💌 Having a clear written plan for when to sell helps investors make rational decisions rather than letting emotions interfere.
• 💩 By compounding the gains from hitting singles and doubles, investors can see substantial growth in their overall portfolio.
• 💇 In a weak market, it may be necessary to sell even sooner, taking gains at 10-15% and cutting losses at 3-4%.
• 🤑 Following a profit-loss plan and consistently reviewing target sell prices helps investors protect their money and capture solid profits.

Transcript

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Questions & Answers

Q: Why does Bill O'Neil suggest taking most profits at 20-25%?

History shows that after breaking out of a good base and gaining 20-25%, stocks tend to pull back and correct. Selling at this point helps investors avoid potential losses.

Q: What should investors consider when sitting on a profit of around 20%?

Investors should ask themselves if they are willing to give back some of the gains by holding the stock through a correction, or if they want to sell and lock in profits. In most cases, it's better to take the profits.

Q: How does selling at 20-25% act as a profitable insurance policy?

Selling at this point allows investors to lock in gains and avoid the risk of seeing profits disappear during a correction. It helps protect the portfolio and allows the investor to put the money to better use in another rising stock.

Q: How is the 20-25% gain calculated?

The 20-25% gain is calculated from the ideal buy point, which may be different from the actual purchase price. It's important to calculate from the ideal buy point to determine the sell point accurately.

Summary & Key Takeaways

• IBD founder Bill O'Neil suggests taking most profits at 20-25% to avoid potential pullbacks and corrections in stocks.

• Selling at this point allows investors to lock in gains and avoid the risk of losing profits during a correction.

• By following the 20-25% rule, investors can compound gains and see significant growth in their portfolio.