Know Yourself and Checklist for Chasing

Earlier this week, on my show, I was asked about selling a stock after one decides to take a tax loss (hint: you cannot buy it back for at least thirty days). This led up to a very important question: When does one sell? It is actually the biggest question every investor faces. After all, when it is all said and done, there are stocks that make a lot of money for many, while others actually lose a lot of money for many. But, why? Simple: because some people sell too early, or they sell too late…

Investing Guide	Trader	Intermediate	Long-Term
*Duration*	1 to 30 days	30 day to 6 months	Six months +
*Risk*	5%	10%	20%
*Reward*	10%	20%	50%
*Vigilance (daily)*	Four Times	Two times	Once
*Financial commitment*	20%	60%	20%

Ideally, an investor should have an equity portfolio in various investment themes. In part, to take advantage of volatility, but also to resist the urge to close long-term ideas too soon, and take too long to close short- term ideas. However, it is easier said than done. Yet over the course of any given 52-week period, the rationale typically plays out to where the advantages are clearer. The decision-making process for buying and selling stocks is the same across all levels of traders. People who buy as day traders, should sell as day traders; People who buy as intermediate traders, should sell as intermediate traders; and etc.Obviously, the idea is to find stocks that are undervalued for intermediate and long-term investors. Traders should actually forget about fair value and look at the Greater Fool Theory which reminds a buyer that though they may be paying a lot for a stock, there is someone in line behind them ready to pay more.

Main Tools

Trader

Charts
Volume
Momentum

Intermediate

Fundamentals (earnings, market share, margins)
Charts

No matter what a person considers himself or herself, there is a psychological aspect to investing that triggers actions not originally intended. You MUST take losses from time to time, and you MUST keep ‘greed’ in check, and be realistic. Stick to who you are as an investor, or inconsistency will result in larger individual loses, wiping out more individual winners.

Equal Value?	Snapchat	Level 3
Value	$10 billion	$10.4 billion
Employees	35	11,000
Revenue	$0	$6.3 billion

Hot Private Companies = Hot IPOs?Last night, I discussed all the noise with private companies that have soaring valuations. It is so amazing that Jessica Alba's business, Honest Company, is now valued at $1 billion. The thing is, she probably deserves it, but I cannot say that for the rest.

At the start of the year, there were 30 private Venture Capital (VC)-backed companies valued at a billion dollars or more. Since then, three have gone public with decidedly mixed results that give naysayers ammo. On the other hand, they also encourage those that think these blockbuster private companies will soon be blockbuster publicly traded companies.

Welcome to the Real World	Name	January Value	Current Value
JD	JD.Com	$7.3 billion	$39.0 billion
MBLY	Mobileye	$1.5 billion	$1.34 billion
XNET	Xunlei	$1.0 billion	$78 million

We learned this week that the most successful investors in Silicon Valley put their money into Snapchat at a $10 billion valuation. Some think it is nuts, others think Kleiner Perkins just has cash to burn. However, I am not sure, so my advice to you is — be careful. Here are some rules to consider as all of these companies begin to sell stock to the public:

Make sure the business isn’t a one-trick pony and peaking
Make sure there has not been too many rounds of financing- see ZYNA and GRPN
Make sure not to chase an IPO price that has been adjusted more than once

Know Yourself and Checklist for Chasing

Recommended

Related:

Join the conversation as a VIP Member

Recommended

Trending on Townhall Videos

Trending on Townhall Media