Stock Discipline

When I started the trust funds I was pretty much in “Buy and Hold” mode.  Since each of the owners of the trust funds has a very long time horizon (their whole life ahead of them), there is a lot of time to recover from a short-term event such as a market downturn and I wanted to encourage thrift and savings rather than a short term attempt to profit from immediate market conditions.

This article shows a graph that the average time a stock is held has dropped from 8-9 years in the 1940’s down to less than half a year in 2010.  While all averages are subject to skew, if you are holding stocks longer than 1/2 a year in your portfolio, you are likely a long term thinker (of sorts).

Thus I have been forced to change my thinking, too.  If a stock is selected in the group because it is a potential takeover target, when that event occurs, you ought to sell.  The prospect of a stock that is part of a larger company is much different than a stock that is an acquisition candidate.  Thus when there was a run up of approximately 40% on Metro PCS the pre-paid wireless carrier, I put in an order to sell this morning for Portfolios 2 and 3.  We will take these winnings and then decide what to do with the remaining funds.

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