source:http://abcnews.go.com/Business/rules-investing-dividend-paying-stocks/
Last Friday was kinda a stunner for some.
Yes we have been waiting and waiting for the market to correct several weeks ago and it never really happen and last Friday was I guess, an indication that it is time. And with all those who waiting for more got burned when suddenly the green portfolio they have turned into red.
I have often advice that when your stock’s unrealized gain has nearly reached your Target Price(TP) you should consider selling it before the price goes down . It does not necessarily have to be at TP or beyond TP, yes you could have earned more but unless you realized the unrealized figures in your portfolio you haven’t really gained anything yet. As I termed it to some stock investor friends their unrealized/paper profit evaporated.
That is why you got to handle your portfolio like a business.
Have you ever have a small or tiny business when you were in your high school years like school project or something. Like selling leche flan or selling home-made pastries, one needs cashflow when running a business. I bet the very first capital you use to start such small venture is your savings and some borrowed tools in your house. Then as you go along with that business and as it becomes profitable with orders coming in now you need to have more capital to supplant the demand.
So what do you do to be able to keep up with such demand?
You either have enough cash now or you borrow money to make things happen. Same also with stock investing. As I have already been saying you got to re-invest your profits back to your portfolio to buy more and better stocks. Borrowing money may look okay but once you borrow money you are tied up to an additional expense which we call interest. Would it be nice if you get to keep all the profit and not shed out some for the use of money, right?
In order to grow your portfolio you can either add additional funds which may come from personal savings or from borrowed money or you can re-invest your gains to your portfolio instead of taking it out and buying stuff that wont give you back money.
Such is a wise action to grow your business. So from now on handle your portfolio like a business, re-invest your earnings and as much as possible don’t borrow money. You don’t need a portfolio management software to do this, all you got to do is have an exit strategy focus on gaining profits.
Stocks is easiest way to earn money and should be manage carefully.