There are many different things to take into consideration when looking at your investments and whether indeed you should buy, sell or hold. It can be tricky to know where to start with regards to market conditions, research, recent announcements, rumours, share price movements and much more. However, there is a very simple test you should carry out on a regular basis, would you buy your shares today?
Review, buy, sell or hold
You should review your investment portfolio on a regular basis to see whether your portfolio is balanced and whether you should buy, sell or hold individual shares. The best way to look at this is to think – would I buy, hold or sell these shares today if I didn’t already hold them?
You should be able to take a cold hard look at your investments on an individual basis and decide what to do next. You may wish to buy more shares even if the price has fall or risen since you bought the original batch, it may be time to sell or simply hold. What if you find it difficult to be unbiased?
What would you say to your family and friends?
When it comes to investing there is no doubt that the proof is in the pudding so, after looking at your own shares on an individual basis, would you recommend them to family and friends? This is the acid test in many ways because while they may be aware of the risks of investing do the fundamentals of individual shares still attract you?
If in theory you are willing to recommend particular shares to family and friends then you must be positive about the future. You may already have friends who hold these particular shares, would you suggest holding for the future or is it time to sell.
There is nothing wrong with a simple hold
Many investors will feel they have to buy or sell a particular share when they do their annual review. This is simply not the case because very often shares are worth holding for the future even if you may not wish to buy any more. It may be that buying more shares in a particular company would make you over exposed to the company or the sector. Do not feel that you have to buy or sell shares on a regular basis to make money as we only need to look back at some of the best investors the world has ever seen for guidance. Many of these investors have held shares for decades although they may have traded tranches in between.
Better prospects elsewhere
Switching for the sake of switching is also a very dangerous activity because there are costs to consider on both sides. If you feel there is more potential in another company there is nothing wrong in selling one of your investments to fund this. Again, do not get caught in the trap of feeling that you have to deal on a regular basis just for the sake of it.
Conclusion
You should be able to look at individual shares with an objective attitude even if you have never bought them before. If you struggle with this ask yourself, would you recommend a buy, hold or sell of a particular share to close family and friends? How confident are you after reviewing the company?