Have you lightened your postions?

Question

I was curious, with the markets being up 5% in the last two weeks has everyone lightened up their stock positions. One of my rules of investing is to always lighten my positions as the market goes up, and to put money back in as the market goes down. In the last few days I have lightened my positions by about 25%. Now I may end up kicking myself if the market continues to go up another 10%, but I have learned from experience that I would be more upset if the market dropped back 5% and I hadn't taken any money off the table. So I'm curious as to how many others have lightened their positions, or are you letting everything ride?

exactduke, I suppose that I would be defined as a trader, but I don't really think of myself as trying to time the market. The market naturally fluctuates up and down, and I don't try to time the moves. I simply buy when the market goes down, and sell when it goes up. Lately the market has been nice enough to make a couple of 10% corrections. As it does, I buy. It doesn't really require a great deal of intelligence. The hardest part is figuring out what to buy. That's where it gets tricky. But if you can figure that out, then it's just a matter of buying low, and selling high.

Tom H, I actually make my living off of my investments. So I maintain a certain amount in my account and withdraw funds as needed. Fortunately I make money faster then we spend it. I hold stocks for anywhere from a couple days to a couple of months. I rarely drop below having 50% of my funds invested. I keep my portfolio diversified among anywhere from 5 to 25 stocks depending upon the market. Currently I'm holding about 20 because the last correction made a lot of good stocks available cheap. Some of them have rebounded quickly, like MTW and AAPL, Others like CSCO and INFY I'll let run a little longer. Then I also picked up some China stocks like FMCN and CHNG, and some RIO. I really like what I'm holding at the moment, but I have learned from experience to lighten up my positions any time the market rises more than 5%. That way if the market does go down I view it as simply an oppurtunity to pick up more bargains, and I always keep a watchlist of stocks to buy on dips.

NJ Gold, I would be cautious about going overweight China. I realize that a lot of Chinese stocks look very cheap and it's ok to have some positions in China, but Chinese markets can be quite volatile. But I suppose if you don't mind the risks there are still some good bargains.

Answer 1

I constantly trade DIAs. I lightened up all my DIA positions this morning. Your philosophy is sound, and it comes after some positive and negative experience in trading.

Dont give it up. Based on my experience, I have learnt not to be greedy, and take money off the table in the heat of an up market than waiting for that peak. It works well for me.

Answer 2

I've done a little selling, and much less buying (but not zero) over the last 2 months.

In your case, do you need any money out of your investments over the next 2 or 3 year? If no, I'd suggest that you are a little too aggressive in your selling. I agree that in this volatile market, you should trade around your core positions. It just seems a little aggressive. Maybe you can ask yourself that question in 6 and 12 months, and see if you could have done better.

I've been trying to trade around my individual stock positions for the last 1.5 years with decent success, and I try to define trading ranges for each stock. I use these ranges and the market's "emotion" to decide buy and sell decisions rather than the market indicies.

I have a diversified portfolio, and I have a couple large positions in financial stocks. Even though these two are now down and might go considerably lower, they both pay very high dividend yields. I have also sold portions of these many months ago, and recently bought those shares back at much lower prices.

I am reinvesting those dividends which should add to my share count rapidly at these prices, if they don't cut the dividends. (Stick with quality & the divs. should be secure.)

Answer 3

I am not taking any money off the table. The maket has been moving pretty steadily upward since the spring of 2003. We have had periodic pullbacks, but how many of these would quality as a correction - maybe a couple??

What you seem to be talking about here is market timing. Very tough business. I would rather keep plowing money into my 401k and/or IRA, and let the market do what it will. When the market is up, I buy fewer shares, and when it is down, I buy more shares.

Answer 4

I'm letting it ride, I dollar cost average so I buy more when the market is down and less when the market is up. Plus it removes the emotional side of things.

Answer 5

I have been swapping out of US equities and looking to go more overweight in Asia, especially China.