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The old high of May 2006 has been surpassed with the prospect of a new all time high – maybe beyond some people’s wildest dreams. I say ‘people’ as opposed to ‘investors’ as many are happy to stand on the sidelines – and only passingly regret as the market’s new highs hit the front pages.
I hear many investors lament that they should have hung on and not sold out. Well that ‘aint necessarily so’. Be careful about such hard and fast statements that perhaps cause you to be too hard on yourself.
There are numerous stocks – in and out of the top 100 that not only have failed to go on to a new high but have actually tanked since – not the least of which is our bellwether BHP!
Even if you do not perfectly time the peak and do not sell down, it is important to be constantly reviewing your portfolio - pruning is an all year round job in trading and investing. Never throw your arms up in the air and say it is too late – it never is.
The extent and timing of your pruning depends very much on your personal characteristics – risk threshold and investment time frame to name just two.
If you are ‘leveraged’ you need to lighten your load as markets climb to a top – but most investors tend to do the opposite. If your leverage is CFDs then the pain of holding on can be quite severe. You may be lucky and hold on to the right ones – but that is sheer luck.
It is not too late to do some pruning - even of your favourites. If their day is done then don’t be frightened to part with them.
“So Mum, in hindsight I did the right thing. I now realise hanging on is not all that smart.”
Tom Scollon
Chief Analyst
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