Brian from Florida is learning how to invest with Rule #1 but currently has a
portfolio of 16 stocks. What to do with what he has?
Dear Mr. Town,
I saw you in Jacksonville Florida in the fall and was energized to get my finances in order.
I am currently on active duty in the Navy. I have two growing boys who will need college, a baby who is in Hospice and has special needs and a fourth child on the way.
In the past ten years I have gone from an buy/acquire (inherit stocks) and hold diversify model to dollar cost averaging an S&P 500 index fund.
In the past 5 months I have made sure my bad debt is gone. I have been investing in myself by reading everything I can get my hands on. I am currently most of the way through your book and I am doing my homework by having read your blog, Automatic Millionaire, Dummies Investing, Millionaire Next Door, Motley Fool book, Mr. Kiyosaki’s books and I have recently bought the Intelligent Investor.
Next I have to research and start paper trading.
But, I have one big problem looming over me and stealing my energy. How do I get out of the businesses I already own?
How do I smartly divest myself from these businesses to minimize my loss and start investing wisely?
Help me clean up my shop so I can start building a future for my family for the coming years and when I get out of the military.
Brian in Jacksonville Florida
Here’s what he needs to do:
Easy as can be.
Put each one through a 4M analysis.
- Those that are not wonderful
businesses you are going to sell.
- Those that are wonderful but
overpriced you are going to sell.
But first you are going to look at
the Tools to see if you should be getting out right now or if the big
guys are still pushing the price up (because they don’t care if it’s a
suck business or way overvalued if they think they can make some short
term money in it).
So you are going to ride these two groups of stocks
as long as the big guys are pushing them. When you get the signals to
get out, get out and that’s the end of these.
Regarding those businesses that are both wonderful and have a nice big MOS — you
are going to look to see if the Tools say to stay in or get out
If it’s get out time, get out and then put these on your Watch List to get back in as soon as the Tools signal the big guys are
Now go play.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.