Highlights in this issue:

*** Two easy rules to help you with your buy/sell decisions…
*** Do what the professionals do to bank a steady share of gains…
*** Tap into these secrets of the investing world and improve your win rate significantly…

-----------------------------------------

From the pen of Karin Iten…

Dear Investment Academy Reader,

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 tools, and you should do well from your investments.

1. Recognise how the market works…
Unfortunately, new investors often naively expect their shares to rise and keep rising.

The fact is: All shares go up and down at times. And, these novice investors often sell up at the first blip, and then see those shares start rising again. But you can avoid this by learning to recognise how the market works.

Note: Share investment generally involves patience. And, as a rough rule, the cheaper the share, the more patience is needed. Just remember, if you invest for the long-term, equities will always outperform any other asset class.

2. Apply the “ten-day” rule
The ten-day rule is a great way to help you decide if you should hold on or sell your shares now. Investors often become nervous when a share keeps rising – that’s the time when analysts usually refer to the share as “overbought’. This means that share 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’s described as “oversold”. This suggests it’s time to buy again, because it can’t fall much lower.

So add up the number of days the share has risen over the past 10 days. Then deduct the number of days when it 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 over bought and worth selling.

3. Consider selling just before the annual results
A great way to bank a healthy profit, is to sell just before annual results come out. 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 trades 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
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.

5. Set a stop-loss figure – and minimise any losses on your investments
Sometimes, certain shares are a bad buy – something unexpected happens and values fall. Make sure you always have a safety net in place – a stop-loss figure of 25% of the price you paid on the companies in your portfolio. This means that when a share falls 25% below the price you paid, sell it – and write it off as a learning experience.

Here’s to your financial freedom,

Karin Iten
For the Investment Academy