Do you stick to your investment targets?

ionapaul

How closely do you stick to your investment targets? Do you set a % or time limit on an equity investment, and then sell when that target has been reached?

A friend of mine in the States with financial planning experience swore by his targets, always selling an equity when it was up XX% or down X%, limiting his risks both upside and down. I find it very hard to contemplate upside targets, downside targets less so (I would often consider selling when down 10%). Over the past year I have been lucky in investing in enquities that have experienced very strong capital appreciation, in particular there was one I sold after 6 months up 87% - I generally only invest in large, well-established companies so this was an extraordainary gain. In the meantime the company issued a profit warning, dropped sharply, I believe in its products and business plan so re-bought and am currently sitting on a 55% gain! Obviously by setting any kind of sensible capital appreciation target, I would have lost out. I wonder does anyone who makes a 300% gain with a high-risk investment actually think beforehand, 'I'll sell once I triple my money'!

I do feel that over the past year I haven't been 100% disciplined in my investing and that this could be very dangerous. I am relatively young and as such am happy with a higher-than-usual level of risk, but also feel the need to 'lock-in' my gains and avoid losses. Anyone else struggle with setting and holding investment targets?

nesf

I try to be very strict with downside targets. I have a max loss I'm willing to accept and from past experience and advice I've recieved over the years, I try to stick to this.

Upside targets less so. I generally will take another look at the investment and try and decide then. Usually I've a sliding scale there. I take x amount of profits at y gain and so on. Slowly taking more and more profits as the investment climbs. I also move my downside up when I take some profits.

If I've made 15% say, I'll sell half and move my lower stop to 5% and see what happens. At worst I'm getting 7.5%. If it hits 20% then I'd take more profits and move the stop upto 10% and so on.

It's defensive, but limiting your losses is more important in the long run imho. Then again, I learned on the Forex, which tends to be crueler. On less volatile markets then the above might be way too defensive.