I never give a specific answer. There's no one size fits all in these situations. It's a deeply personal decision.
What's your financial situation? Are you hurting for money
to live? Do you support a mistress as well as your wife and kids? What's your conviction on the stock? How do you balance that sentiment with reality? What do you do for a living? How much do you make? Is your job secure? How's your cash flow? The list goes on.
There's no standing answer to situational questions of what to do; however, I'm comfortable calling a couple relatively broad themes universal.
First, now is not the time to make the decision on an existing AAPL position. You should have charted that course of action
you bought your first share. It absolutely should not come during a time of crazy emotion. Your emotion. The other guy's emotion. Wall Street analysts' emotion. The media's emotion.
Because, even if we say
we're not emotional
, at some level, we all are. Even if you take profits or you buy the dip or you act all aloof and indifferent, emotion drives who you are.
Don't fool yourself. You can't escape emotion. The most straight-faced, hardcore, disciplined day traders -- emotional beings. It's not about whether or not you're emotional; it's about how you control that emotion.
In investing, this process of control must be constant. It's focus No. 1 from position entry to position maintenance to exit.
You bought AAPL at $XXX and you will sell this much at $XXX (on the up or downside). You're scaling into your position at X levels Y times a month, quarter, year and you will scale out when this or that happens.
Whatever. Have a plan. Write it down. And hold yourself to it when the time comes to act. No regrets if you leave money on the table or the thing ends up running after you sell. Over the long run, this type of discipline protects traders and investors from catastrophic losses.
It safeguards them from a phenomenon I wrote about back in April on
During that time I got some stuff about AAPL right, some stuff wrong, but I was -- as I am now -- near-term bullish on the company, long-term bearish/cautious. Admittedly, today I am not quite as bullish near-term (how could you be?) and not quite as bearish long-term (
). That aside,
here's the "warning" of sorts I issued in April
: I wrote these words in
when it seemed all AAPL could do is go up. Longs were throwing 1980s coke parties and snorting stock certificates off of glass coffee tables. But, since that article, AAPL is down roughly 17%.
I have seen the process take place. I have fallen victim to it. With each victory, you become all the more certain that there's no way -- God willing -- you can be defeated. A little bit of loyalty, and Tim Cook and China will take care of the rest.Ironically, seeing profits slowly start to get smaller only strengthens your resolve. You hold. You listen to the pumps to buy on the dips. And it keeps working. You're rich. But for every disciplined investor who manages his or her position properly, there's at least one devotee who stays all-in and keeps digging himself or herself a deeper hole. Before you know it, your otherwise rational mind fooled you into staying in a position from 700 down to 250 because you just knew it had to make it to 1,000. It was destiny.
What makes the whole situation even more tragic is that it's relatively easy to manage a position like AAPL, particularly once you have built up some size. Apple is a long-term investor's dream not simply because it seems to always end up moving higher, but because it's an income-generating powerhouse.
It is what it is. Speaks for itself. And it's timestamped.
All I will add is that in addition to having a written plan when you enter the position, you're crazy if you do not write covered calls against an AAPL position of 100 shares or more. That was the case back in April and that's the case now. Always has been, always will be.
Writing covered calls on AAPL, coupled now with the dividend, is better than taking a second job you never have to show up at, yet it still pays.
And, oh, whatever you do -- don't make sweet love to a stock. Not even AAPL.
--Written by Rocco Pendola in Santa Monica, Calif.
Rocco Pendola is
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