The Dividend Guy Blog: You’re Losing Money If You Don’t Sell These Stocks
Investing is often thought of as an exercise in finding what to buy. There are many ways to do this, from chasing momentum to finding values in the market. But one way to think about investing is with the concept of inverting.
That could mean rather than looking at what stocks to buy, looking at what stocks to sell. With thousands of stocks to invest in, most investors look at what to buy.
But looking at stocks that shouldn’t be owned at all can provide valuable insights. Many popular stocks may be poor choices for investors. That’s because popularity can drive up prices, without a corresponding increase in value.
While many investors may not want to hear about a potentially dangerous stock, avoiding a disaster of an investment is crucial for long-term wealth-building.
For instance, investors looking at dividend stocks can often find some companies with incredibly high yields. But if that payout is more than earnings, it can’t be sustained. And if a company is going into debt to sustain it, shares could be in for a massive repricing down the road.
And investors who buy into a company for a specific thesis, like the aging of America, can still be disappointed. Any company can play to an investment idea. But if they don’t execute well, others can come in and grab market share. That could lead to a permanent impairment of the company’s value as a business.
