Ep 06: The Sell High Equation

On this episode of the Wealth Equation podcast, the first of the new year, Maurice briefly acknowledges the roiling of current events before turning to investment advice in the current market environment. With stocks trading high, he focuses on the wisdom required to know when it’s time to sell.

While it may take courage to buy when stocks are low, a different sort of strategy and discipline is required in determining when it’s time to let go. At some point even the most astronomical stocks have a “mean reversion,” a return to prices that are more in line with their “normal” valuation. Maurice highlights three possible options for ensuring your portfolio is set up to maximize opportunity:

• House Money Option. Reduce risk by selling down to your original investment, then pre-determining a point at which to sell the rest. This protects your original investment and reduces exposure to a fraction rather 100% of your gains.
• The Seatbelt Option. A higher risk strategy that includes setting up a trailing stop-limit order at 10% below your investment’s highest price. But beware a caveat: A stock can close at one price on Friday and open Monday at a substantially lower price, leaving your stock open to a sale well below the price point you had in mind.
• The Sensible Rebalance Option. This one is for the long-term investor who is buying famously enduring, evergreen stocks (think McDonalds or Nike). This investment approach involves taking a pause when stocks hit all-time highs and selling in order to re-invest in other elements of your portfolio that have perhaps not performed as well.

To hear more about the “buy low equation” that Maurice references in this podcast, check out Episode 2 of The Wealth Equation: https://podcasts.apple.com/us/podcast/ep-02-the-buy-low-equation/id1492810571?i=1000469254731

 

Key Quotes:

“Money is made when you buy good stocks – good investments – at low prices.”

“Wisdom comes from experience and a sober look at what’s going on. You have to be wise in selling great investments at high prices. And the first step is making the right assumption.”

“Take advantage when prices are high so you can replenish your portfolio at some great prices. You make a fortune in the market by buying good investments at low prices.”

“The only way to have money to buy at low prices is to begin to take gains at junctures like this in the stock market.”

 

What We Covered:

0:40 – New Year welcome and quick catch-up on what’s going on at Wilson Wealth.

2:44 – When is it time to get out of the market?

3:28 – The importance of timing in your decision to sell – and the wisdom required.

4:32 – How to figure out when to get out of stocks/investments that have done well.

7:08 – Three options for profiting from and re-allocating investments.

7:30 – The House Money option.

9:28 – The Seatbelt option.

13:30 – The Sensible Rebalance option.

 

Connect with Maurice:

https://www.wilsonwealth.com/

https://www.linkedin.com/in/mauricewilson

Maurice L Wilson (@therealmauricelwilson) • Instagram photos and videos