Just come out of a nice sleep and have this idea on my mind to BLAST OUT...
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Just over a year ago I hadn't sold any shares in over ten years. If you count closing spreadbets I have sold about 45 times since then... I have sold some regular shares too...
What have I learned from this?
I was brought up on the 'long term buy and hold' approach. 'Buy and hold forever.' Well... in the very long term you are dead. Nobody has lived for ever yet (although one ex employer thought he would...)
So at SOME point in your life you are probably going to sell some shares, if you have any. And I've always known that deep down so now I am learning how to sell shares. The act of selling shares is not physically hard even if it may be psychologically hard if you have done long term buy and hold for a long time. But in reality you just click the sell button.
Saturday April 14th Update...
What are the 'risks' or capital investment of buying a share or doing a spreadbet? Well for a share the buying cost for me can be around 1% or slightly less. 0.5% stamp duty, £5 dealing cost. Then there is the eventual cost of selling the share for £5. Then having thought about it there is the capital cost and time investment of that capital. When I am buying a share usually the minimum time I would hold it is at least six months- otherwise it would be better to spreadbet it. In fact the only time I have held a share for less than six months is with Bovis- should just have held that even though I made a high percentage in a few months- influenced by Chris Bailey there, nobody is right all the time.
What are the capital risks or investment of owning a spreadbet? There is the spread cost, which on a FTSE 100 company could be 0.25% or less. Then the spread cost of selling, again around 0.25%. Then there is the small 'daily charge' you incur for having a spreadbet. You can get 3, 6 or 9 month options to avoid this charge... you will be paying more for the share at the start but if you sell it before these periods you can get a higher than normal price for the share too. This area is something I have to learn more about- I have done both but at the moment only have daily funded bets.
So there is no point doing a spreadbet if you think the price will stay flat, or even close to flat, for a sustained period. That period can even be a month. Ideally you should be aiming for good gains- but don't CHASE them sometimes you have to give spreadbets time. Never panic and sell too soon- you should keep a daily view on your limits and stop losses too. Chris Bailey only does spreadbets in 'extreme situations'.
Key thing that has been buzzing around in my head about spreadbetting over the past few days...
Sometimes you may only need one or two 'ideas' at a time. Greene King was the best spread idea over the past 3 days in the FTSE... and it was my biggest spread. With more of a capital investment in it I could have made an absolute fortune- it was still my biggest spread and I did very nicely. Looking backwards, ideally ALL my capital should have been in Greene King. In fact, imagine if I had sold ALL my shares and just put it on spreadbets on Greene King... just the rise in the past two trading days would have made me around one million pounds...
You can't look back though you can only look forward. I still own Greene King shares and got the timing close to perfect there. Including stamp duty and dealing costs the shares are still up over 20% in just over 2 weeks...
Really it all about identifying those key shares seeing they are FUNDAMENTALLY GOOD then taking advantage of the positive catalyst. Buying a fundamentally good share or spreadbetting before a key results date or before good news is key...
Same with shorting. This can effect even fundamentally good shares... you want to short before the bad results date or bad news is made public... I have quite a lot more to learn about shorting though...
Key difference between shares and spreadbetting- how much you can win and lose. You can win and lose a lot more with spreadbetting. I actually have relatively little money in spreadbetting at the moment having exited a number of positions in the past 2 weeks. All of the exits were done with nice gains.
Let's hit it off with one very recent example. I sold Royal Mail a few days ago for around 572p. It fell quite sharply on Friday after I sold it. 572p was around a three year high. I think that is a key factor in selling shares- if you have a yield on a fundamentally decent but 'low growth' share of Royal Mail of around 4% and an OK PE of around 12.5... coupled with many brokers thinking it is a sell it is OK to sell.
Because you have to be aware of that 'downside risk'. Remember you can ALWAYS buy a share back again if it say falls 10% for no fundamental reason. The opportunities will always be there.
The fundamentals of selling are similar to the fundamentals of buying in my mind. I've gone over this many times but in a nutshell if the PE is TOO high and there isn't much of a dividend yield you may think about selling. Of course I still have much to learn about selling but here are some thoughts I have about it...
A lot of times I trust my instincts when to sell a share. Yet... you have to be careful not to look at shares TOO much. You can let a share hit a limit order then sell- if there is no cost involved in this it is fine just to set one up if you are prepared to edit it at least once a day. Basically you should be looking for that moment when selling a share... I can see this is OBVIOUSLY overvalued now, time to sell.
You have to be aware of the potential 'risks' or 'headwinds' (that is a popular investment writing word... Mr Rupert Hargreaves likes that one ;)). Like with BT... it is going to be a LONG time if ever before it reaches 500p again. Some of this risks can be hard to see others not. But you have to be aware of a risk that could send the share slamming down... remember that you can always use that money from selling for other shares... or just SPEND IT ON YOURSELF which is something I am learning to do too!
So yeah with shorter term trading when selling you need to know key dates like ex dividend dates and result dates. When spreading if you can spread with a juicy dividend date coming up soon on a fundamentally good share you can well turn a profit. Think Taylor Wimpey and ITV recently...
So yeah... just so you know I am going to slam out a NONE SHARE NINETY THOUSAND post when we reach ninety thousand. Just had this idea for instinct article and it turned out nicely. Time to win more on my goal day...
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