Forum Archive Index - May 2004

[Robin Benson <rob@hammerheadmedia.co.uk>]

Hi Pete

On 11 May 2004, at 09:15, PC wrote:

> Greetings
>
> The past few weeks I have watch most of my exciting Australian shares
> (mainly mining and oil) go down and down, funny enough my "boring" New
> Zealand shares have gained ground.  One example is ASX:BRW which not 
> long
> ago I brought for what I thought an ok buy of 5.6c, today is 3.8c.

High risk companies = big potential movement, up and down.

> So my question is at what point to you more experienced people sell at?

You would be hard-pressed to find many people here who agree on when to 
bale out. Can't speak for others but it would seem to simply be a 
measure of one's reaction to the suggestion of loss. For some of the TA 
folk, there would probably be a hard limit at which they simply bale 
out and go in hunt of a more positive experience. The FA folk on the 
other hand might not be so interested in what the share price is today, 
having invested, if they did their homework correctly, in a company 
that is likely to continue to produce the goods (dividends, growth) and 
be around for years to come.

> How do you determine when you should bail and when you should ride it 
> out? Lets
> assume that there is no logical reason from the fundamentals and that 
> its
> business as usual for the company. And can we consider two cases:
> Case 1. shares are just dropping 2-3% each day, a slow steady drop.  
> Do you
> set a point where you will bail?

Some will set strict price thresholds, others trailing stops (i.e. if 
the price drops to x% of its high during the term of the investment 
then a sell is triggered).

> Case 2. the entire market is in a serious dive.  I have been wondering 
> if
> their was major crash do you bail fast and sell everything or do you 
> just
> hold on and hope that in 6 months things will recover?  Do you set 
> point on
> some index and if the market starts to drop more than x% in a day you 
> decide
> that's the point you sell everything?

One of the big problems that everybody faces (when markets are moving, 
up or down, with some momentum and speed) and everybody tries to find a 
good answer to is how do you know that you're in a major crash or major 
upswing (i.e. when to sell and when to hold)? That's the $64k question!

Robin


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