Let's say I buy stocks of a company at $1000, and 6 months later, stock is trading at $1500. What should my strategy be at this point.

Should I hold the stock? or should I sell the stock to book my $500 profit or, should I sell and rebuy at $1500?

  • 3
    "should I sell and rebuy at $1500?" What point would that make, profit-wise? – glglgl Oct 6 '20 at 11:21
  • Dude, some people would sell $1000 worth. Note that you then have all your costs back - you literally "can't lose". The other $500 worth you can just forget and keep forever. Clever right? – Fattie Oct 6 '20 at 13:28

Should I hold the stock?

Would you BuY this stock for this price? Yes, this is the same question - you are in a stock because you think AT THIS PRICE it is a good investment. Where it came from is irrelevant. If you would buy it - keep it. If not - get out.

or should I sell the stock to book my $500 profit or, should I sell and rebuy at $1500?

Well, selling at 1600 and rebuying at 1500 is great (with the exception of resetting your timer for long term capital gains). The main question is whether you CAN rebuy for 1500. What if it never comes down?

There is no simple rule - at the end it all runs down to what you expect at a given price.

  • "Yes, this is the same question" - that's what they often say. But there is a difference: buying and selling (mostly) comes with costs. Holding doesn't cost anything. – glglgl Oct 6 '20 at 11:08
  • Ah, unless you buy 1 share the cost is exactly one thing: IRRELEVANT. If the price in the example is 1600 USD per share, what difference do 2-3 cents do? – TomTom Oct 6 '20 at 11:25
  • Depending on your brokerage, your "2-3 cents" may as well be 5 € (or the equivalent amount). – glglgl Oct 6 '20 at 11:27
  • Stupidity in choosing a broker is not part of this question. OBVIOUSLY - if you insist on burning money by choosing a high fee broker, then you pay a high fee broker. It is not a sign of doing your homework. – TomTom Oct 6 '20 at 11:31
  • What's wrong with this idea? "I didn't sell my Lehman Brothers shares at $50 because it would have cost me a commission." – Bob Baerker Oct 6 '20 at 11:34

When deciding what to do with a stock you own, then the price at which you originally bought it is irrelevant. The only thing that matters is how you expect the price to change in the future.

When you expect the price to go down, you sell it. When you expect the price to go up, you hold it or might even consider to buy more of it.

So, looking at the history of a 50% increase in the past 6 month... will the price of this stock go up or down?

The answer is that we don't know. Perhaps it has reached the peak and will now start falling. Or maybe it has just started raising and will go up even more. We don't know what company you invested in. And even if we would know, we can not predict the future.

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