Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice! As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers.
The stock market had a miserable day today. The Dow closed down 268 points or (2.65)%, the Nasdaq was worse with an 85 point or (3.85)% loss. Even the S&P was hit, closing at 1041, down 33 or (3.10)% on the day.
In the midst of this bloodbath, my Ecolab (ECL) stock, which I had recently purchased last month on 4/30/10 in my swith from Schlumberger (SLB), was made at a cost basis of $49.10. I sold all 65 of my shares today at $45.05/share, yielding me a loss of $(4.05) or (8.2)% since purchase.
I did not sell this stock because of any particular fundamental piece of information that disturbed me. I like this company and would prefer to be a shareholder of its shares.
However, my own trading system demands of me to sell shares in companies in which I have made an initial purchase when they have declined (8)% since that purchase. That is exactly what happened to my Ecolab (ECL) shares.
It is also not surprising that this holding was a recent purchase.
It makes sense that the positions that would be 'undone' first would be the recent purchases that are most vulnerable to a downdraft in the market.
One of my goals in pursuing this blog and putting my own real holdings, my successes and failures out publicly is to test whether one can reall do what I am striving to do. I am working to minimize my losses both individually by selling stocks quickly should they decline and also to utilize that sale as an indicator in itself that something is rotten with the market. Thus the proceeds of this sale are remaining in cash.
My cash position is approximately 40% now. I didn't do this on purpose. It wasn't a stroke of genius. It was my own strategy of selling holdings on declines and putting the proceeds in cash. I am avoiding reinvesting these sales on losses so I shall not make a bigger mistake and compound these losses with additional sales on losses.
I shall be waiting for a sale on a gain to be adding a new holding. This may be awhile. Meanwhile, I shall be patient. Monitor my own holdings and am prepared to unload additional stocks until I am at my minimum of 5 holdings. Even then, I shall not tolerate losses but rather shall sell these at 8% declines, replacing them as well with new positions (because I need 5 holdings) but am planning to do this with even smaller in size positions as I work to reduce my exposure to equities as indicated by my own sales.
Thank you again for stopping by and visiting. I hope that my explanation is comprehensible for you. If not, please let me explain more. You can leave your questions or comments right here on the blog or contact me at bobsadviceforstocks@lycos.com.
Yours in investing,
Bob