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How to Know When to Sell Apple Stock (Nasdaq: AAPL)

Trying to figure out when to sell Apple stock (Nasdaq: AAPL), particularly given its spectacular performance over the past several years, is a major dilemma.

If you're long on AAPL, you're no doubt trying to sort through a lot of conflicting signals.

With AAPL down about 16% from its high of $702.10 on Sept. 19 amid a wave of negative news, some financial pundits are calling a top and urging Apple investors to sell Apple stock.

Trouble is, they've done this many times before during Apple's long climb. Sometimes it's after AAPL hits a new high, and sometimes (like we're seeing now) it's after the stock dips in reaction to some bad news.

But investors who opted to sell Apple stock in years past lived to regret it.

Back in 2010, for example, when AAPL breached the $300 mark, plenty of bears urged shareholders to rush for the exits.

Any who followed that advice missed out on a 100% gain.

At the same time, Apple stock can't keep rising forever. No company can maintain the sort of exponential growth necessary to fuel the kind of gains Apple has enjoyed over the past few years.

But the big question is when this will happen. Now? Next quarter? Next year? 2015?

And as if that weren't enough to make an Apple investor's head spin, there's the added stress of volatility.

From late November to early April, AAPL soared $270, an astounding 75% increase in just four and a half months. Then it fell $100 in the next five weeks.

With turbulence like that, retail investors easily can get heartburn trying to figure out when to sell Apple stock.

That's why we put together some guidance.

When to Sell Apple Stock: Tips for Investors

If those dispensing investing advice were really honest about it, they'd admit they almost never know exactly when to sell a stock.

Professional investors know this, and instead use an array of strategies and tools to maximize profits while minimizing losses.

Such tools are useful with any stock investment, but especially so in the case of Apple, given the stock's huge increase in price and the cacophony of conflicting opinion.

"Never ride a big winner into a loser," said William Patalon III, Executive Editor of Money Morning and Private Briefing, noting a common mistake many investors make – waiting too long to sell.

Instead of stewing over exactly when to sell Apple stock, or any other stock for that matter, Patalon suggested investors try some of these strategies:

  • Cover Your Initial Investment: One way to deal with a big winner is to sell enough of the stock at its current price to cover your initial investment. Say you bought 50 shares of Apple stock at $300 a share for $15,000. When AAPL hits $600, you need to sell only 25 of your shares to recover your original outlay. The rest is "house money," Patalon said, which you can let run a while longer if you think the stock might rise further. Even if the stock drops, you've ensured you won't lose any money.
  • Take Some Profit Off the Table: Another strategy is to simply sell half of your winner to lock in some profit. In the case of AAPL, if that $300 Apple stock went to $700 and stagnated, you could sell half of it for $17,500 and let the rest ride in case the stock resumed its rise. But if it fell back to $300, you could still sell the other half for $7,500 and end up ahead by $10,000.

Apple Stock Chart
(Nasdaq: AAPL)

  • Trailing Stops: That brings us to another key investing tool. Patalon always urges his readers to use a 25% trailing stop on all holdings. That just means your broker will sell your stock if it drops 25%, preventing further losses. But the trailing stop price rises if the stock goes up. So in our example above, once the stock reached $700 it would have been sold automatically at $525 on its way to $300, preserving an extra $5,625 of profit.
  • Rebalancing: Patalon made note of one other risk that comes with winning stocks – the more they rise, the more they dominate your portfolio. He recommends that investors periodically take profits using one of the methods described above to make sure no one stock becomes too large a part of their portfolio.

While such approaches mean investors forfeit any chance of getting the maximum profit by selling at the highest price, Patalon said that happens only very rarely anyway.

"It reminds me of an old saying: you'll never buy at the very bottom and you'll never sell at the very top," Patalon said. "It's better just to take what the market gives you."

Bill Patalon dishes out nuggets of investing wisdom five days a week to the subscribers of his Private Briefing service. To learn more about that service, and learn how to gain access to his free investor reports, click here.

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  1. H. Craig Bradley | November 4, 2012


    Apple was a great stock at even today's lower price IF you bought low enough ( $7.00/share in 1998). Thats the key, buying low. Then even a modest increase results in a handsome profit. You have to control greed and not hold out for the maximum theoritical return. The idea of rebalancing is especially useful, especially when a single stock approaches 10% of the value of all your stock investments.

    Concentrated portfolios can be dangerous because markets tend to surprise. I would have to say that stop loss/limit orders have proved to be the least helpful suggestion with Apple in its climb to $700 this year. It seems no matter where you set the stop loss, the market still finds a way to come low enough to take out your stop loss. First it was the "flash crash" in 2010, then other setbacks on the way up. Apple is a volatile stock, even in a bull market. What will it do when a bear market arrives? You don't want to find out if you bought in during the last five years. Sell half the next time it gets to $700, which may be after the end of the fourth quarter (Christmas season).

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