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How long do you hold onto stocks for the long-term?

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  • Mar 12th, 2014 4:20 pm
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Deal Addict
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Mar 19, 2010
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Onterrible

How long do you hold onto stocks for the long-term?

When do you guys dump stocks?

I am a very novice investor. I only have two stocks right now. Fannie Mae and Nokia, and I have various mutual funds.
All are doing very well for me.

My friend told me that as soon as he makes 20% he sells the stock. I've definitely made way more than 20% on the two stocks I have, but the problem is, if I sell those two stocks I have no idea what other stocks to buy?

What strategies do you guys employ for the long term investor.
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Mar 31, 2013
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I try to think about each stock/etf I own in terms of if I would buy it today if I weren't already invested. If the answer is yes, then keep holding it. If it is no, then sell.

The 20% figure seems arbitrary and in place for no apparent reason.
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Dec 14, 2010
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My strategy is to invest in growing dividend stocks. So I never sell, as long as the company keeps growing its operating earnings. The objective is perpetual growing income from dividends.

I only sell if fundamentals deteriorate, like falling operating earnings for 3 years, payout ratio above 100% or dividend cut.

Selling when you are up x% works if you are trading (short term), not investing.

Rod
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Onterrible
rodbarc wrote: My strategy is to invest in growing dividend stocks. So I never sell, as long as the company keeps growing its operating earnings. The objective is perpetual growing income from dividends.

I only sell if fundamentals deteriorate, like falling operating earnings for 3 years, payout ratio above 100% or dividend cut.

Selling when you are up x% works if you are trading (short term), not investing.

Rod
How does it work when a stock pays dividends? Does the dividends translate into more stock or actual cash given to you?
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May 31, 2009
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If you have a good stock, you keep it....until metrics tell you that its overvalued.

Example, Lululemon and Couche Tarde. Solid stocks to own since they launced.
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Nov 2, 2008
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What's your end game? Day traders make the call daily when they make a set amount per that company and sell. If you're looking for long run/additional income when you retire just sit on them and keep buying systematically.

Just like one share of Coca-Cola [KO] in 1919 when they started trading, would be worth millions today...

Another option too, if you need the money, then sell/withdraw, otherwise it's not doing harm just sitting there, you're definitely making more with even a few bucks in you Waterhouse/whatever account than you would the equivalent amount in a 'savings' acct. at your bank.
Canuckerr wrote: How does it work when a stock pays dividends? Does the dividends translate into more stock or actual cash given to you?
They simply pay you, and the money shows up in your investment vehicle as a 'credit' like a chequing acct.

If you own banks it''s typically close [or just over] a dollar, anything else like commodities its <0.50$ per share you hold.
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Dec 9, 2007
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I think REITs are an interesting purchase right now, along with some blue chip names in natural resources
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I do some fundamental analysis and come up with a target before I buy a stock. I aim to hold the stock until it gets near that target.

But what I do depends also on if the fundamentals change along the way (set new targets if fundamentals change negative or positive) and also account for how the market is doing because overall market trends will generally trump any fundamental target. Ie. if the market is high and it's March/April I anticipate a market-wide correction. If oil is also high in April, I expect a correction in oil. If the stock still hasn't reached my target, I might sell anyway because I anticipate a market wide and sector wide sort of correction that would drag my stock down regardless of my fundamental analysis. So if I'm ahead at that point (even if no where near my target) I would likely sell anyway with the expectation of being able to buy even cheaper after the correction.

Sometimes I get burned though, because stocks generally get closer to my targets than I allow them to. So the lesson would be that if you have a target in mind that is logical and conservative, it doesn't hurt to just hold for that target unless the fundamentals change. But you'd have to be patient enough and disciplined enough to hold the stock regardless of what it does because otherwise you might be holding when you're ahead and selling if it falls again, regardless of what your target is. And you need to have a reasonable target in the first place, so you need to know the industry well enough to be able to do analysis yourself and come up with reasonable targets - and then trust your targets instead of listening to everyone else - but stay up to date and adjust your targets when the fundamentals change.

Never buy a stock without having a target in mind that you understand. What is my target for this stock, why is it worth that much, why is it going to get there? If you answer those questions, you'll know why you're holding and you'll know if your target should change if/when the company reports new news.

Having a target is not as simple as watching some analyst tell you his target, because 90% of the time they don't explain their target nearly well enough, they just tell you the number. And that's why 6 months later after the stock has crashed he says he sold - and you're left holding the bag. He adjusted his target when news came out and you didn't know to adjust your target, you just held for his target. So that's why you need your own target, and you need to adjust it along the way based on your analysis.

I also find that analysts will change targets if the old target is hit, and won't necessarily justify the change in their target. They do this because they always need to be bullish on something and be suggesting something. They can't just pull all client money out of all funds and say 'you guys shouldn't buy anything at all, we're in all cash right now. The market is hot and I want to see a correction. Pull all your money out and talk to me in 3 months.' (although they can sometimes say that - but then raise their target on their 'favorite' stock anyway, and tell you that you should buy it anyway!) So if they've done analysis that suggests a $10 target, and the stock goes to $10 - if they still think that's the best stock just because there's nothing better that they know of, they will seemingly just change the target to $12 and explain it by the fact that they really like what management is doing, and 'it could be worth as much as $12 if they keep performing..' or whatever. Which suggests that they're changing the target just by being more aggressive in their valuations or something. I always find their targets to be of interest, but my target is not at all influenced by their target and if they raise their target I don't necessarily raise mine. Or if they lower theirs and rate it badly, I ignore that if I have set a target that I believe in.
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Canuckerr wrote: How does it work when a stock pays dividends? Does the dividends translate into more stock or actual cash given to you?
Like others said, it's usually paid in cash. Great way to remain invested in volatile times, the dividends keep flowing regardless. In my RRSP I chose to DRIP, so the dividends automatically buy more of that same stock. I won't need the cash anyway anytime soon. Save me the commissions and in some cases, it's offered at a discount for market price.

Rod
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Jul 30, 2007
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dividend type of stocks, like Cdn banks and railways, I have been holding on forever.
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rodbarc wrote: Save me the commissions and in some cases, it's offered at a discount for market price.

Rod
Are you getting fractional shares this way?
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gogoblender wrote: Are you getting fractional shares this way?
Getting fractional is unrelated to not paying commissions and buying at discount price from market orders.
I'm getting fractional on the shares from the company that I work for, the rest is full shares only.

Rod
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Mar 4, 2007
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rodbarc wrote: Getting fractional is unrelated to not paying commissions and buying at discount price from market orders.
I'm getting fractional on the shares from the company that I work for, the rest is full shares only.

Rod
booblehead wrote: dividend type of stocks, like Cdn banks and railways, I have been holding on forever.
I'm looking to add some more dividend stocks to my TFSA. Looking for companies with a long history of paying dividends. However, it seems like everything is overpriced and near it's all time high. Do you guys have any recommendation on companies I should look into.

Currently, I own Royal Bank, Bell and Fortis in there right now. Fortis is the only negative performer but I'm holding onto it for the very long term.

Cheers
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Siralex wrote: I'm looking to add some more dividend stocks to my TFSA. Looking for companies with a long history of paying dividends. However, it seems like everything is overpriced and near it's all time high. Do you guys have any recommendation on companies I should look into.

Currently, I own Royal Bank, Bell and Fortis in there right now. Fortis is the only negative performer but I'm holding onto it for the very long term.

Cheers
Although the market is overvalued overall, there are still a few good companies that keep increasing dividends and its operating earnings, and are still undervalued. The following from my list reflects this scenario: ap.un, bns, cjr.b, csu, emp.a, mru, hcg, imo and mkp. Also, on the financial side, lb and fn is very undervalued, both paying good dividends.

Royal and Bell are great, but considering the forecast operating earnings for this year, FTS is overvalued and worth $24, bringing payout ratio to a dangerous level. It is not on my list and won't make it until the Arizona acquisition starts raising earnings for them and revert the trend. Their 5 years growth has been lower than competition, at a mediocre 2.8%. I like EMA, CU and ACO.X better.

Rod
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Mar 19, 2010
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Onterrible
If you're buying in stocks for the long-term, it shouldn't really matter at what price you buy at right?
ie. if I wanted to add some dividend stocks to my portfolio, even though the prices are at highs, in the long run most stocks would still be a good buy right?
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Canuckerr wrote: If you're buying in stocks for the long-term, it shouldn't really matter at what price you buy at right?
ie. if I wanted to add some dividend stocks to my portfolio, even though the prices are at highs, in the long run most stocks would still be a good buy right?
You're trying to oversimplify things in order to convince yourself to buy. The answer is: it depends. If it was as simple as saying "dividend stocks are a good buy, even when priced highly", it would be a no-brainer decision. Every decision in the markets is a tradeoff with a lot of uncertainty.
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Canuckerr wrote: If you're buying in stocks for the long-term, it shouldn't really matter at what price you buy at right?
ie. if I wanted to add some dividend stocks to my portfolio, even though the prices are at highs, in the long run most stocks would still be a good buy right?
Well, I rather buy in chunks (so I can add on the dips) and buy undervalued / fairly valued companies only (the overvalued will be fairly valued at some point later) to have an edge than simply buy all today. By edge I mean a higher initial yield and a lower ACB. Everyone has a different strategy, but having some strategy to pick better entry points is an advantage than buying at any price. Stock price follows earnings, so an overvalued stock will drop eventually.

Also, to invest properly, you don't simply add some dividend stocks in your portfolio and forget it (because it's for long term). You should track their results, ensure that they keep growing operating earnings and preferably dividends too. Watch payout ratio and forecast earnings. Paying dividends is only part of the equation. FTS.TO and TRI.TO have been growing dividends for decades, but I don't think they are good candidates to be added now (or anytime soon unless they earnings start growing).

Rod

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