Should I set price targets when I buy stocks? USA News Today


Should I set price targets when I buy stocks? USA News Today

Matthew Frankel, The Motley Fool
Published 6:32 a.m. ET Sept. 28, 2017


It’s hard to check your email without hearing about the next “hot” penny stock that’s going to make you rich. But can they really deliver?
Video provided by TheStreet

Instead of focusing on stock prices, here’s a better way to determine when to sell.

Q: When I buy stocks, should I have a price target in mind where I’m willing to sell my shares and walk away?

I’m not a fan of price targets, and I’ll share a personal story of why.

A couple of years after Tesla’s (NASDAQ: TSLA) initial public offering, I bought shares of the then-unproven company for just under $35. I said to myself, “If the stock doubles, I’ll sell.” Not long after I made my investment, the Tesla Model S shocked the world when it became Motor Trend magazine’s Car of the Year in 2013, and the stock shot up so quickly that I didn’t have time to sell at double my purchase price. I ended up unloading my shares for about $85 each.

Today, Tesla stock is worth more than $370 per share. To say that I sold too soon would be an understatement.

I learned the hard way that instead of setting a specific price target, it’s far more important to ask yourself whether your reasons for initially buying the stock still apply, and if they do, whether the current share price is justified.

In the case of my Tesla investment, not only did my initial reasons for buying still apply (game-changing automotive technology), but the company had gone from a niche player with the Tesla Roadster to a viable mass-market electric car manufacturer. Not only was the higher share price justified, but due to the success of the newly released Model S, the company’s future looked brighter than ever.

Price targets can be a useful tool in the context of “I think Company X is really worth $50 per share, but it’s trading for only $30.” But the reasons for selling a stock should go far beyond the movement in its share price.

Matthew Frankel has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

Offer from the Motley Fool: Offer from The Motley Fool: The 10 best stocks to buy now

Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. In fact, the newsletter they run, Motley Fool Stock Advisor, has tripled the S&P 500!*

Tom and David just revealed their ten top stock picks for investors to buy right now.

Click here to get access to the full list!

*Stock Advisor returns as of Sept. 5, 2017.

Read or Share this story: https://usat.ly/2fAf1dY

Should I set price targets when I buy stocks? USA News Today

Source link

Should I set price targets when I buy stocks? USA News Today




Leave a Reply

error: Content is protected !!