Trying to Reason with Hurricane Season

When to Sell a Stock

This morning, we closed the shutters. We moved all the furniture inside. And we watched through a single, small window as the sky got dark and the rains started to pound. Our town isn’t in the direct path of this storm. But we’re proximate enough to the Gulf of Mexico that we’ll see plenty of rain. There isn’t a day on the calendar this week where thunder and lightning aren’t in the cards. The dogs certainly aren’t happy, either. One question that emerges when the storms threaten the coast is what to do with my open positions. When do I sell a stock? How would I manage a portfolio if and when the power goes out? What if a tree knocks out a power line, and I can’t sign into my account for more than a week? It’s a fair question.

When to Sell a Stock

I have multiple portfolios with different exit rules. Since picking an exit is the most important part of any trade, I am pretty organized.

On my retirement portfolio, I never sell. I don’t use trailing stops on any of those accounts. The reason is simple. The markets are resilient. There is a long-term bias to the upside. I’m not willing to sell these stocks when there is a sharp downturn or crash because they tend to bounce back over time. If I exit those stocks, I’m psychologically less likely to enter back into those same positions.

Fidelity once did a study of the best-performing stock portfolios over time. The firm found that the people whose portfolios were the best over time fell into one of two categories. First, either they had forgotten that they even had a retirement account with Fidelity through a previous job…

Or they were deceased.

Long-Term Versus Short-Term

When it comes to making money over time, a long-term approach is best. With my short-term trades (three-month outlook) and weekly/day trading, I’m largely using limit orders and trailing stops already. I prefer to use these tools no matter what the weather is like because it makes me less emotional

With an options trade, I’ll look to set a limit order if the price of the option doubles. Again, I’m not chasing gains, and I will not turn a 100% win into a loss.

Well, the wind is blowing harder now. And my little Jimmy Buffett reference will need to come to an end. With the market taking a tumble today, I may see a few trades hit stops sooner than later. But for the long-term, I’ll be here. This house will still be standing, rain or shine.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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