Big Gain Dilemma?

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At the beginning of June of 2010, I unloaded some bonds and bought some stocks. 

Over a couple of drinks last week, while sitting on my friend’s Vancouver patio, he said, “Look, I know that you’re up about $12,000 on those purchases you made in June.  Why don’t you sell and take the profits?”

He thought I was nuts for holding the stocks after such a quick paper gain.

But he didn’t know the half of it.

Since the beginning of June, my portfolio has a “paper increase” of about $130,000 U.S.

Am I tempted to sell anything?  Nope.

Trading stocks, I think can be a pretty slippery slope.  If you “get lucky” on a trade, and sell at the right time, you’re going to be tempted to go back into the casino.

My motto is to hardly ever sell.  If something reaches a silly price, trading at a ridiculously high earnings level, or if the company’s CFO resigns over impropriety, then I’ll dump my shares, but I’m mostly a “buy and holder” for life.

When I feel good about the businesses I own, and I understand them thoroughly, then I buy more shares when their prices fall.  I’m a bottom feeder of great businesses, and I hold for a very long time.  That’s one of the reasons every individual stock I own is “up” based on my average cost (the other reason is luck). 

True, there are people who can dance in and out of stocks and do well.  But studies show that, generally, the lower the turnover on an investor’s account, the higher their returns.  Even mutual funds with the lowest turnover (which have lower fee and tax burdens) report higher returns as an aggregate.  … read more

The biggest enemy to sound investing is the one we face in the mirror each day, as Robert suggests at DIY Investor

 Fear and greed pull many people’s accounts underwater.

What do you think? 

Have you done well trading stocks over a significant period of time?  Or do you prefer to buy and hold, like I do?