Dear friend,

If you want to make big money from your share portfolio, you need to know when to sell and bank your profits.

Successful investors tend to stick to several, simple money-making rules. Use these too, and you should do well from your investments...

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1. Recognise how the market works – so that you can play the market successfully

The fact is: all shares go up and down at times. Novice investors often sell up at the first blip,
and then see those shares start rising again.

Expect a two steps backward, three steps forward pattern to emerge with many shares.

2. Apply the ‘ten-day rule’ – and decide if you should hold on or sell your shares now

Some investors become nervous when a share keeps rising. And, they start describing it as ‘overbought’. Meaning that the stock is no longer worth the money it’s trading at and should be sold, because the price can’t go much higher.

Similarly, when a share is spiraling down, it is described as ‘oversold’; and this suggests it is time
to buy again, because it can’t fall much lower.

Recommendation: add up the number of days the share has risen over the past ten days. Then
deduct the number of days when it has slipped back. If you have a minus number, the share may be oversold, and worth buying. Or, if you have a plus number, it could be overbought, and worth selling.

3. Consider selling just before the annual results – and bank the healthiest profit then

It’s not uncommon for share values to rise on the back of impressive annual results – but then fall to a lower-than-normal level afterwards.

Why? Many investors who want to sell, hold off to obtain their dividends. But once the share becomes ex-dividend, these investors sell and the price fades.

So, think about selling before the cut-off date, even if it means forfeiting your dividend. This may be worthwhile if the dividend is nothing out-of-the-ordinary.

4. Watch to see when shares peak – and decide if that’s the time to sell.

Strategy: professional investors usually sell when a share drops 7% below its peak. Hint: this strategy is most effective with slow, steady risers – as it suggests the share is now slowly and steadily falling.

One must take caution though – if a share has made fast progress, it may well experience a similar, rapid fall. And it may be best to cash in at the moment it appears to have peaked, and slips a few cents. Otherwise, it could go into freefall.

Happy investing!

P.S. Have you visited www.InsiderConfidential.co.za yet?