After a fantastic run, I thought now would be a good time to talk about paying attention to your portfolio; keeping an eye on your holdings, monitoring your watchlists, pulling profits and getting rid of losers or underperformers. It’s ironic, but during great times like these when it seems like all of your stocks are going up, investors can form bad habits or get lazy. Even bad decisions can sometimes get rewarded in a bull market.
But when the market stops going straight up, that’s when you can really get into trouble. So you need to keep paying attention. Deciding which stocks to enter, of course, is important. But once you’re in, it doesn’t mean your work is over.
For example: if one of the criteria for getting into a stock was that it had a low Debt to Equity ratio, but you then saw that ratio change to an unacceptable level (a level that would not have put it on your radar screen in the first place), then you should consider getting out of that stock and looking for a new stock to replace it – one that does meet your criteria.
Or let’s say, for instance, that you use the Zacks Rank as a timing indicator, and you look at the Zacks #1 Rank List for immediate movers. If in a few weeks, earnings estimates are moving lower and the stock moves to a Zacks #4 Rank (‘sell’), take note and consider dumping it. Sure, it was a Zacks #1 Rank, but it’s not anymore. Think about it; if you never would have gotten into a Zacks #4 Rank in the first place, why would you now want to hold onto one? That’s using your common sense, and paying attention to your portfolio.
Sometimes, people can get attached to a stock. Once they’ve convinced themselves to buy it, they sometimes hang on too long. Even to losers. If a company reported bad earnings and the stock is down -10% against you, get out. Don’t let your love of a stock (or denial) ruin your portfolio. Almost every big losing trade anybody has ever had in their portfolio (-50%, -60% or even –90% or more) could have been exited when they were just beginning to crumble. If you get out and it zips back up, you can always get back in if you want. But if it keeps going down, you’re just losing more and more money. And you’ll be wishing that you could get out at that earlier price.
So once you’ve found the items that have proven to work well in picking profitable stocks, be sure to monitor those values. If they no longer meet the winning criteria, then get rid of them fast and find new ones that do. Here are 5 new stocks that look great and are currently coming up on some of our best screening strategies in the Research Wizard.
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