Episode 8: When to Sell a Stock pt 2

Transcript is automatically generated

Today we’re going to talk a bout when to sell a stock. Number three, did you lose money, that’s a combination of part two. But if you lost money, it’s important for you to really take the time and think what would happen if you didn’t sell the stock because most people, once they lose money in the stock is their automatic knee jerk reaction is to sell a stock. And with this gentleman and his Nike share or shares, I realized that Nike has been in a slump for the last three months. And his really had been in a slump, you know, for the last week.

So without knowing when he purchased stock, I’m assuming that he purchased it within three months to a week. And now the stock is continuing to fall. And he’s getting a little antsy. But I don’t know, I really don’t know he could have impulse purchase this stock three years ago, he didn’t add a timeframe. And I didn’t ask the main factor is, once you consider it, the number two fact did you make money are the second third Feck did you lose money, you want to think about what happens if you don’t sell. If you look at the retail market, a whole retail market is down. And Nike isn’t by itself. And we’re coming up on the holidays right now, as of recording, it is October.

So retail tends to speed up after October because Black Friday coming up, you have the holidays coming up. So during the winter, people like to purchase clothes also. So you have a whole lot of forces that may be acting on Nike stock right now. And they make they’re dealing with supply chain issues. And they may not be crushing their sales right now. But you don’t want to be short sighted because Christmas is around the corner. And that is a giant retail holiday. And Nike they tend to clean up when everybody is buying new winter clothes, or new boots or whatever, again, Jordans for Christmas. So, worse come worst scenario. I always say if you lost money, you need to think about the worst and the best scenario.

And generally the worst scenario is the company goes to zero, your stock is worthless, you lose all of your money, and the company goes bankrupt. And when I think of the best case scenario, I think of a stock that doubles triples, you know really just multiplies 10 times and value. So when you while you’re considering your losses, and what could happen if you didn’t sell the stock, it’s always important to think about the good and the bad. And if a company goes to zero, and it goes bankrupt, stockholders are the last people who get a portion of that money that the company is holding on or their assets.

So bondholders get paid first preferred, stockholders get paid first creditors get paid first, stock, common stockholders get paid last. So if your company goes bankrupt, you’re generally not going to have anything to show for it. And have a company like like Nike, it’s a very, very low chance that Nike goes bankrupt within the next six months to a year. And that’s because they are just such an old company, and such a storied retailer that it would really take a disaster or catastrophe or some really weird once in a lifetime event to cause Nike to go bankrupt. Within a matter of a month or a year. It’s not impossible.

But like I said, we’re considering that worst case scenario. So Nike has a little bit more protection. And that’s why I always tell people to invest and large companies that are well known that you can easily Google and pull up the news about the company and also pull up their financial news. If you use like Google Finance or Yahoo Finance or even on the NASDAQ site. You can find financial information and financial news on a company so it’s very unlikely that Nike goes bankrupt they may continue to you money, they may not make a profit, but I don’t think Nike will go bankrupt anytime soon. So this gentleman is more than likely safe from a bankruptcy.

Unknown Speaker 5:14

That’s the worst case scenario. And in the best case scenario, what if the company doubles or triples orquadruples or goes up tenfold, you have a 10 bagger. That is about just as unlikely. Nike is a very old company, they are not creating very, very new products, their company doesn’t have a super big buzz around a new product like a Tesla, or back when they had their Air Jordans. And they first came out. Nike is pretty much making its money off of its name off of the brand off of the storied history. So I would say that it’s very unlikely that Nike creates a product like the iPad or iPod that everybody must have. And that revolutionizes an industry. So more than likely, Nike won’t double a triple, what probably will happen is once the supply chain issues that are caused by COVID, are corrected, this Nike stock will probably go back up.

So I’m what this gentleman is not like he was investing in some type of shady company that that’s never going to come back, it’s just going to keep going down, I really believe that Nike will, you know, game, small, short profits over the next 510 15, maybe even 20 years, and you’re going to get some stock appreciation, the stock may double, but it may take about 50 years for the stock to double. But as long as the month the stock is rising in price and making money over the long term, you know, what do we care about these last couple of months? Especially if you’re a long term investor? Number four, do you think you will make money. And if you don’t think you will make money, there’s no point to invest in a company in the first place.

But if you think you will make money. Yeah, you might want to hold it, that’s just common sense. Unless you have an ethical objection to how a company runs his business. There’s lots of successful companies that I will not invest in, because I’m not okay with the way they make money or some of their practices. If I think the company will make money, I’m more than likely willing to invest in that company. And Nike is a perfect example of a company that I know they will make money, and they want to make lots of money, but they’re such a big company that they kind of cancel each other out. But as far as we’ll make make money, I’m saying yes. So there’s a chance that they may have some news or some earnings, surprise or whatever, and the stock goes back up.

And that’s very important to consider when you’re buying the stock is up, is the company making money? Do you think the company will make money and for Nike, I haven’t even looked at their balance sheet and I can almost certain for certain tell you that there are they are making money. And if they’re not, then it’s more than likely a temporary event. So that brings us to the number five. If you did sell the company, if you did sell the stock, what would you do with the money. And I think that’s a very important thing to think about when you are buying a stock. And I think it’s a very important thing to think of when you’re selling a stock. After you get rid of this stock, what are you going to do next? Me personally, I have a watch list of about 50 stocks that I would like to buy.

And so anytime in the day, month or year that I decide to sell stock, I pretty much always know what stock I could put more money into or that I want to put my money in. And if I see one a good price, I don’t hesitate. A lot of people have that analysis paralysis, they are scared to sell a stock because they’re scared they’re gonna miss out on some price increase in the future. And if you already know what you’re going to do with the money that you get from this stock sale, you can plan to put it in another stock that you’re going to be confident can keep rising. And when you do that you are locking in your profits from the stock that you sold.

And you are creating an opportunity to make more money in the next stock without risking your losses. Because, you know, if you could always sell the stock that you have, you could always sell in this hypothetical situation. You could always sell Nike and then buy it back. But that gets into a whole tech situation you get into what’s called a wash sale. I encourage you to look that up to make sure you’re not creating wash sales within your account. out, unknowingly. But

Unknown Speaker 10:04
it’s always smart to consider what would you do with the stock. And if you have a better place to put your money, then Nike and you don’t like the company now will always tell you sell Nike, um, this gentleman said that he was partial to Walmart, Walmart is a great company I shop at Walmart. So if I was going to sell my Nike stock, I would definitely consider putting it in a company that is like Walmart. And the beautiful thing about Nike and Walmart, they’re both billion dollar companies, they both are national, if Nikes International, but they have stores all around people know the brand, people trust the name. And it’s two different industries, but they both kind of, you have a product and you have a retail seller.

So I will say, moving my money from Nike to a Walmart or something big like that, because especially if, you know, I didn’t even like Nike, but you got to find a place to put your money. And a place that you’re in wherever you put your money, it has to be an area where your money is either going to grow or not be at risk, because what is the point of making a profit and Nike selling it off, buying something that is risky, and then losing not just the money that you invested, but you lose the profit that you made when you sold the Nike stock. So I always suggest that people before you get into a stock, or even before you sell it, always think about your plan for your money or be a strategical investor and it’s not hard any company that you like, you can put them on your watch list. And you’ll you’ll always have a list.

And as long as you keep an eye on that watch list, I can almost guarantee you that anytime you look at it, one company will be at a decent price, especially if your watch list is as big as mine, and you have 50 stocks on here. So monitor your watch list. And having a decent Watch List of quality companies will really take some of the fear and hesitation out of selling because you know that you are for one getting out of the company that you want to be out of. But you’re also you also have a plan for your money. And you can move with a lot more confidence. So that concludes my list of five things to consider before you sell a stock. And as you notice, I didn’t give it advice I gave perspective. And that’s my whole point of me having this venue and you know, really speaking on these topics, because a lot of people out here are given advice. And I don’t want to be the one that give advice.

I want to be the one that you know helps you make an informed decision not a panic decision, not your rational decision but using these five questions and you can come up with your own. But these five questions are a great start. If you are thinking about selling or unsure about selling so I’m going to go over them real quick. If you’re thinking about selling the stock number one, ask yourself do you need to sell number two? Did you make money? Number three, did you lose money? Number four, do you think you will make money and number five, what will you do with the money after you sell? Thank you for listening to this podcast.

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