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Portfolios 303: When to Sell an Investment

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1.
Which is the most effective strategy for long-term investors?
Choose wisely. There is only one correct answer.
Sticking with a good long-term investment. It's too difficult to trade in and out of an investment as its price changes, and just because an investment rises 25% does not necessarily mean it's ready to peter out.
2.
Which of the following is not a good reason to sell an investment?
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You need the money. Before you invest in stocks or funds, make sure you have an emergency stash in an easy-to-access savings or money-market account to cover unexpected car repairs or sudden unemployment.
3.
When has an investment become too expensive?
Choose wisely. There is only one correct answer.
There are no hard and fast rules about what's "too expensive"--that's up to you. You need to define what expensive means to you as part of your investment philosophy.
4.
It may be a good idea to sell an investment if it does not live up to your expectations. But before you sell, it's a good idea to _______.
Choose wisely. There is only one correct answer.
Compare the investment to an appropriate benchmark. Doing so will give you some needed perspective on the underperformance. You might also compare it to its industry peers or a suitable index.
5.
If the price of one of your investments drops, the most rational thing to do may be to keep it.
Choose wisely. There is only one correct answer.
True. It may even be a good idea to buy more of it.