When to take those Share Profits and the Best Ways to do it
So we’ve explored what to do when the share investment losses arrive, so what about the upside, when and how to take the share profits.
One method that’s often used is called Top Slicing or sometimes Top Skimming, love some of these share investment terms, these somehow conjure up images of being a milkmaid, skimming off all that cream.
That in essence is what Top Slicing is, you wait until a share makes for what is for you as the investor a satisfactory profit, you take the profit and leave in your original investment value to hopefully grow even more profit for you.
From a monetary point of view this is how it looks:
If you invested £1,000 in Vodafone and in six months time that invested holding is worth £1,500. You sell £500 worth of shares leaving you £1,000 left in Vodafone shares. Simple.
Now the trick to this strategy is knowing when to take those profits?
Here are a few things to consider when making that critical sell decision
– Do you have another share you are keen to investment in? I like this one because it creates another great habit. If you haven’t got anything else to invest in, why take out your money? If the investment is still growing, leave your money where it is. Additionally, always keep a list of potential share investments. Keep these investments in what is in essence your fantasy portfolio, track it like you do your normal portfolio, see if those theoretical holdings are making money and compare them to your actual investments. Benchmark your actual holdings. You can use Yahoo Finance to do this, it is still one of the best portfolio tools around. If you could be doing better with your actual profits as compared to your fantasy portfolio, get top slicing and reinvest.
– Check whether those shares you’re about to top slice are going to payout a dividend soon, keep an eye on those dividend payment dates. You might want to collect those dividends before you make a sale, don’t throw money away.
– What is the general sentiment for the share you are holding, are things still favourable? Do this by keeping a track of news for the company. Set-up news alerts for the company and follow the financial press. Do this for all your holdings as a matter of course.
– Keep a track of the increases in share price over time, is it slowing or gathering momentum? What is the volume of trade, do the number of buys exceed the number of sells, how strong is the demand in your share?
– In terms of what is the lowest value to take when top slicing, I’d say never take less than £100, that should really be the lowest you’d ever scrape when top slicing. It’s just not worth it when you consider broker charges.
– How is the company performing financially? Watch those quarterly forecasts and quarterly financial updates, if they keep exceeding expectations and forecasts, chances are you want to be keeping hold of your full shareholding.
Enjoy reinvesting those profits.
All the best, .