Why Selling a Stock and Re-Entering is a Bad Idea
If you have been following my posts for awhile now, you would have known that I am extremely Bullish on $UPST. I spent months researching it and have continuously followed the company ever since.
Real Story
When the price went from $120 to $205, I sold all my shares thinking that I could re-enter at a lower price. To my horror, Upstart continued to climb higher, to $280, $340, & $400. In total, I missed out on USD$25,000 profits.
This is no small sum considering I just graduated 1 year ago and don’t have a huge bank balance.
While ruminating on it, my emotions got to me and I had to let the anger out by punching the wall. It was such a painful experience and I thought deep and hard how not to make the same mistake again.
After shaking off my emotions, I finally figured out why it is better to HOLD & SIT through drawdowns than to Sell and hope to re-enter at a better price. Or at the very least, TAKE PROFITS SLOWLY.
Reason #1
The upside to the stock is so much more than the downside. A stock can drop a maximum of 100%, while its upside is unlimited. In this case of $UPST, I can see it becoming a $300B company or even $1T. That is 2000% and 6500% upside respectively! In case you’re wondering, nope I didn’t add an extra 0.
Reason #2
If you had sold and the price continues to go up, it is PSYCHOLOGICALLY CHALLENGING to buy back in at a higher price. Trust me, once you sold it, you will be VERY UNLIKELY to buy it back at a higher price as that is like slapping yourself in the face.
Reason #3
Even if by some miracle you managed to sell close to the top, what price are you going to Re-Enter? What if the price doesn’t drop to your target and continues going up?
Reason #4
From experience, it is much more emotionally painful to miss out on 200% or heck 6500% upside than to Sit through 40 - 50% drawdowns.
This is evident when $UPST dropped from $160 to $90, I did not punch the wall. But when $UPST went from $205 to $400, I did.
Reason #5
Experts and so many investors smarter than you have tried timing the market and failed. What makes you think you’re special enough to pull that off? I mean you could give it a shot but chances are, it is wiser to learn from others’ mistakes.
Final Words
I wrote this post as a reminder for myself to come back to whenever I have the urge to sell off my stock. I also hope that by reading this, others can benefit and not make the same painful mistake.