Investment
When to Sell an Investment – Morningstar.ca
“You’ve got to know when to hold and when to fold,” according to the famous country and western song, The Gambler.
Kenny Rogers was talking about poker, of course, but knowing when to sell is one of the crucial facets of investing that marks out the amateurs from the pros in investing. It’s also one of the hardest decisions an investor has to make, not least because it often means you’re admitting you’ve made a mistake.
We look at five reasons why you might sell an investment – and hopefully make the process easier if you to decide to hit the button.
1) Something Fundamental Has Changed
In the internet age, there’s a lot of “noise” about companies hitting investors every day: a chief executive quits, a scandal emerges, or there’s a profit warning, a rights issue, a dividend cut – the list goes on. It’s often hard to ascertain whether an announcement is a one-off or symptomatic of deeper problems.
Some recent corporate failures (for example, Toys R Us or Carillion) have involved multiple profit warnings over a number of years, which could signal potential exit points for an investor.
Often companies are so associated with certain individuals (Elon Musk at Tesla (TSLA), Steve Jobs at Apple (AAPL)) that any change at the top can spark fear in investors. When Steve Jobs stepped down from Apple in 2011 due to ill-health, for example, some analysts thought the company would struggle to match its previous success – the share price is now 10 times higher.
This is also pertinent for fund investors. If you’ve followed a star manager for years and he or she quits, whether to a rival or to set up shop on their own, you may choose to follow the manager to their new home. Of course, some companies and fund houses have better succession plans than others, so this “follow the leader” approach may be less effective over the long-term, and some star managers have found life rather harder outside of big institutions.
Should I Sell?
A fundamental change is a time to take stock and reassess an investment but it’s not an automatic sell signal.
2) Your Own Strategy Has Changed
Investor goals change over time according to where they are in their life cycle, their attitude to risk and financial circumstances. Racy growth funds and stocks bought in your twenties may no longer be appropriate in your sixties, a time when people traditionally start moving down the risk scale.
Portfolios can change drastically over time as you add more to them and some stocks and funds perform better than others. You might have started off with a 10% exposure to tech, for example, but that has ballooned to 50%.
Sometimes investors take too little risk for their age and financial circumstances; and as you get more experienced at investing, you may want to ditch that vanilla tracker fund in the pursuit of higher returns. Or a financial adviser may, after looking at your retirement plans, argue that you need more equity exposure to meet your goals. A windfall, inheritance or promotion could put you in a better position to handle volatility than when your first started investing.
Should I Sell
It’s always good to step back and take stock of your financial situation and revisit the investment goals you had when you started out. You could think of the process more as “rebalancing” rather than “selling”.
2) It Keeps Underperforming
At Morningstar we encourage investors to take a long-term approach. One year’s poor performance figures isn’t always a sell signal. But after a long period of sub-par performance, your patience may run out.
For an active fund investor, the failure of a fund to beat the index over three years could be a reliable indicator to bail out. Or the fund could consistently come at the bottom in its category, meaning that rival funds have outpaced it. It could be that the investing style is out of favour, or it could be that something is intrinsically wrong with the process.
Poor fund performance often sends investors heading for the exits, something Morningstar monitors every month. Indeed, several high-profile managers have lost their jobs in recent years and fund outflows proved a reliable early indicator of investors losing faith. Fees are also a factor here – perhaps you were happy to pay above average fees when the fund was on a hot streak, but now they are starting to look uncompetitive when it’s putting in a sub-par performance.
Should I Sell?
An investment can’t be a top-performer over every time period but a sustained period of underperformance should be a signal that it’s time to look at why the stock or fund is consistently lagging its peer group and whether an alternative could serve you better.
4) Or, it’s Been Outperforming
You may have been fortunate or wise enough to spot a future star such as Tesla and Shopify (SHOP) in the early stages and have seen the value of your holding grow hugely as a result. If you’d bought Tesla shares a year ago, you’d be up more than 800%.
At such times it can make sense to cash in some chips. The conventional wisdom is to run your winners for as long as possible, but from a portfolio perspective, a share price that has doubled or more can cause its own problems. For example, it could skew the risk profile of your portfolio as the successful holding grows in size.
Morningstar’s Christine Benz has some housekeeping tips here. Known as rebalancing, reducing your holdings in a fund or stock holding that’s done well releases cash that can be put to work elsewhere. You still have a stake in your existing holdings so if they keep outperforming, you continue to benefit.
Should I Sell?
Past performance is no guide to future performance, the investment adage goes, so taking some profits can be a wise strategy after a stellar run. But that doesn’t mean you have to sell your entire holding.
5. You’ve Inherited Some Shares
Your relatives may have left you some shares or funds as a bequest. Perhaps they were talented stockpickers or maybe they left you some duds that you wouldn’t dream of owning yourself. Either way you can revisit point two on our list and ask – does this stock or fund fit with my own investment plans and even ethical beliefs? And do I have confidence in the fund manager or company to outperform in the future?
Point four also comes into play here – if your relative has done exceptionally well out of the investment, perhaps it’s time to cash in? There may even be future capital gains tax implications in hanging on to the shares that you’d rather avoid so seeking professional advice may be useful in this situation.
Should I Sell?
Sometimes the simplicity of cash beats the uncertainty of shares – with an inheritance it’s often helpful to know exactly what you will get so you can plan what to do with it.
How to Sell
So far we’ve looked at why you might sell but not how. So what happens if you do decide to hit the button? Here are some tips:
1) Selling in tranches can reduce the risk of mis-timing the market. Just as you would drip-feed money into the market when buying, you could take the same approach to selling. You need to stick to this plan, especially if market conditions are unfavourable at the time you have scheduled to sell.
2) Emotions can be the enemy of investors, especially when fear dominates as it did earlier this year. A market rout, when shares are posting big daily moves, is probably not the best time to get a decent price for your shares or funds. Often the market moves so quickly that it is easy to be left behind in the stampede to sell. It’s worth remembering that any falls in the value of your holding are only “paper losses” until you actually sell and it could be that your holding recovers and you get a better price by waiting to trade.
3) Practice makes perfect: the first time you ever sell it can feel like an irreversible decision. But experience – and making some mistakes along the way – can make you a better investor. Because most stock markets are reasonably liquid, you can always buy the stock or fund again if you’ve changed your mind, and this is something the professionals frequently do.
Investment
MOF: Govt to establish high-level facilitation platform to oversee potential, approved strategic investments
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KUALA LUMPUR: A meeting with 70 financial fund investors and corporate members at the recently concluded Joint Investors Meeting in London has touched on the MADANI government’s immediate action to stimulate strategic investment in important technologies, according to the Ministry of Finance (MoF).
In a statement today, it said that the government is serious about making investments a national agenda through the establishment of a high-level investment facilitation platform to ensure the implementation of potential and approved strategic investments through a “Whole of Government” approach.
Minister of Finance II Datuk Seri Amir Hamzah Azizan (pix), who led the Malaysian delegation to the Joint Investors Meeting from April 20 to 22, said that the National Investment Council (MPN) chaired by the Prime Minister is an integrated action that reflects how serious the government is in making Malaysia an investment hub in the region.
Among the immediate actions taken by the government is establishing the National Semiconductor Strategic Committee (NSSTF) to facilitate cooperation between the government, industry players, universities, and relevant stakeholders to place the Malaysian semiconductor industry at the forefront and ensure the continued growth of the electronics & electrical industry, especially the semiconductor sector, as a major contributor to the Malaysian economy.
The government also aims to empower Malaysia as a preferred green investment destination as well as remove barriers and bureaucracy in the provision and accessibility to renewable energy, especially for the new technology industry, including data centres, said Amir Hamzah.
He also said that the country’s investment prospects have reached an extraordinary level, with approved investments surging to RM329.5 billion in 2023 from RM268 billion in 2022.
He said about 74 per cent of manufacturing projects approved between 2021 and 2023 have been completed or are in process.
In addition, Amir Hamzah said the greater initial stage construction work completed in 2023 (RM31.5 billion) and 2022 (RM26.3 billion) shows a positive trend for future investment opportunities.
“From a total of 5,101 investment projects approved in 2023, as many as 81.2 per cent or 4,143 projects are in the services sector, 883 projects in the manufacturing sector, and 75 projects in other related sectors,” he said.
Before this, Amir Hamzah met with international investors in New York and Washington to clarify the direction of the implementation of the MADANI Economic framework to improve investors’ confidence in Malaysia’s economic level and strengthen the perception and investment sentiment of foreign investors towards the country.
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Compound interest is a thing of magic. It’s also one of your best bets if you’re looking to retire rich.
It might take time and patience but there’s not a whole lot of heavy lifting when it comes to a buy-and-hold investment strategy. What matters most is having decades of time in front of you, which will allow you to maximize the benefits of compounded returns. And, of course, choosing the right investments is equally important.
The magic of compound interest
With a decent return, building a million-dollar portfolio might not be as hard as you think. An initial investment of $15,000, returning 15% annually, would be worth just shy of $1 million in 30 years.
First off, 30 years is a long time, which means you’ll need to be planning your retirement far in advance. However, all it takes is one initial investment of $15,000 and the right stocks to build a $1 million portfolio.
Additionally, it’s important to remain realistic and acknowledge that a stock returning 15% annually is not exactly common. That being said, the TSX certainly has its share of dependable companies with track records of returning far more than just 15% per year.
I’ve put together a list of three Canadian stocks that are perfect for hands-off investors who are looking to retire rich.
Constellation Software
It will require a steep initial investment, but Constellation Software (TSX:CSU) is well worth its nearly $4,000-a-share price tag. When it comes to market-crushing returns, the tech stock has been in a league of its own over the past two decades.
Even as the company is now valued at a massive market cap of close to $80 billion, the impressive returns have continued. Shares are up more than 200% over the past five years. That’s good enough for a compound annual growth rate (CAGR) of 25%.
At a 25% annual return, a $15,000 investment would be worth a whopping $12 million in 30 years.
Descartes Systems
Descartes Systems (TSX:DSG) is another tech stock that’s no stranger to delivering market-beating returns. The company is also only valued at a market cap of $10 billion, leaving plenty of room for growth in the coming decades.
There’s a reason why Descartes Systems is one of the few tech stocks trading near all-time highs today. This stock is a proven winner, with lots of growth left in the tank.
Over the past five years, the stock has had a CAGR just shy of 20%.
goeasy
The last pick on my list is a beaten-down growth stock that’s trading at a serious discount.
The consumer-facing financial services provider has been hit by short-term headwinds from sky-high interest rates. With potential rate cuts around the corner though, now could be an excellent time to be loading up on goeasy (TSX:GSY).
Even with shares down 25% from all-time highs, the stock is still nearing a return of 300% over the past five years.
goeasy was crushing the market’s returns before the recent spike in interest rates, and there’s no reason to believe why the company won’t continue to do so for years to come.
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TORONTO, April 24, 2024 /CNW/ – Flagship Communities Real Estate Investment Trust (the “REIT” or “Flagship“) (TSX: MHC.U) (TSX: MHC.UN) announced today that it has completed its previously announced public offering (the “Offering“) of 3,910,000 trust units (the “Units“) on a bought deal basis at a price of US$15.35 per Unit for total gross proceeds to the REIT of approximately US$60 million.
The Offering was completed through a syndicate of underwriters co-led by BMO Capital Markets and Canaccord Genuity Corp.
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The REIT intends to use the net proceeds from the Offering to fund a portion of the approximately US$93 million aggregate purchase price for the REIT’s previously announced acquisition of seven manufactured housing communities comprising 1,253 lots (the “Acquisitions“) and for general business purposes. In the event the REIT is unable to consummate one or both of the Acquisitions, the REIT intends to use the net proceeds of the Offering to fund future acquisitions and for general business purposes.
The REIT has also granted the underwriters an over-allotment option to purchase up to an additional 586,500 Units on the same terms and conditions, exercisable at any time, in whole or in part, up to 30 days after the date hereof.
About Flagship Communities Real Estate Investment Trust
Flagship Communities Real Estate Investment Trust is a leading operator of affordable residential Manufactured Housing Communities primarily serving working families seeking affordable home ownership. The REIT owns and operates exceptional residential living experiences and investment opportunities in family-oriented communities in Kentucky, Indiana, Ohio, Tennessee, Arkansas, Missouri, and Illinois. To learn more about Flagship, visit www.flagshipcommunities.com.
Forward-Looking Statements
This press release contains statements that include forward-looking information (within the meaning of applicable Canadian securities laws). Forward-looking statements are identified by words such as “believe”, “anticipate”, “project”, “expect”, “intend”, “plan”, “will”, “may”, “can”, “could”, “would”, “must”, “estimate”, “target”, “objective”, and other similar expressions, or negative versions thereof, and include statements herein concerning the use of the net proceeds of the Offering.
These forward-looking statements are based on the REIT’s expectations, estimates, forecasts and projections, as well as assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies that could cause actual results to differ materially from those that are disclosed in such forward-looking statements. While considered reasonable by management of the REIT as at the date of this news release, any of these expectations, estimates, forecasts, projections, or assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those expectations, estimates, forecasts, projections, or assumptions could be incorrect. Material factors and assumptions used by management of the REIT to develop the forward-looking information in this news release include, but are not limited to, that the conditions to closing of the Acquisitions will be met or waived in a timely manner and that both of the Acquisitions will be completed on the current agreed upon terms.
When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as they are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. A number of factors, many of which are beyond the REIT’s control, could cause actual results to differ materially from the results discussed in the forward-looking statements, such as the risks identified in the REIT’s management’s discussion and analysis for the year ended December 31, 2023 available on the REIT’s profile on SEDAR+ at www.sedarplus.com, including, but not limited to, the factors discussed under the heading “Risks and Uncertainties” therein and the risk of the REIT’s plans with respect to debt bridge financing for the Acquisitions not being achieved as anticipated. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Forward-looking statements are made as of the date of this press release and, except as expressly required by applicable Canadian securities laws, the REIT assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
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