Q: Is there any negative to holding dividend stocks until they reach a certain capital gains goal and then selling them? My fear is that my stocks may be up 25 per cent but some ugly market correction could wipe that out in a flash. So I’m happy to collect the dividends while I wait to reach the arbitrary number and then I’m itching to sell. Then I move on to my next pick.
A: While I can understand your desire to “lock in” paper profits, I can see problems with this approach. You might sell a great company only to watch its shares move higher. Just because a stock has gained 25 per cent – or whatever number you pick – doesn’t mean it’s overvalued or vulnerable to a major pullback. It may in fact be undervalued or fairly priced. Now, if you have the skill to value a company and you conclude that there are better opportunities elsewhere, that is another matter, but a price change alone won’t tell you that.
Source: Globe and Mail
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