In light of the big recent move in ProMIS Neurosciences (PMN.TO), I have been flooded with questions from readers about 'when is the right time to sell?', so I thought it would be helpful for everyone if I posted my thoughts on here. Quickly though...if you find yourself faced with the dilemma of when to take profits, pause for a second and congratulate yourself. Stay humble, but smile for a second and pat yourself on the back. Investing isn't easy despite what some may think or tell you. It is flat-out hard work.
For those that do not follow ProMIS, I built my initial position around $.05/share, and yesterday the stock closed at $.20/share. While that certainly is a significant paper gain, I am not celebrating yet as I believe the stock has a long way to go still as the company is only now scratching the surface of its real potential. However, that is not to say that you shouldn't take some profits as the stock rises just to take some risk off the table...but this all depends on several things that I will discuss below.
ProMIS Neurosciences (PMN.TO) 6 Month Chart
First and foremost, I cannot tell you when you should buy, sell, or hold. That is a decision you have to make based on your own risk tolerance, your ability to handle volatility in your positions, and your own personal circumstances. In no way should anything I say about this topic, or any topic, be construed as investment advice.
Let me tell you my thoughts on ProMIS, for example, and perhaps that will help you across all your positions when you find yourself in a similar situation. I have taken profits in about 20% of my overall position after this nice run up 300%. I haven't taken those profits because I have less conviction in the company, but I have taken those profits because it's the prudent thing to do after a 300% gain. Only selling 20% of my position keeps the position very large for me, while at the same time taking just a little bit of risk off the table while locking in some profits to deploy elsewhere when an opportunity presents itself (which could include back into ProMIS should it fall significantly from here....anything is possible with microcaps!).
You might be wondering why I wouldn't sell at least half, if not more, after a 300% gain. And the reason is because the investment thesis is in such early innings that I believe the upside from here could be more substantial than anyone thinks. Yes, the stock could very well trade back down to $.05/share today, tomorrow, or next week...who knows! But, the one thing I know is that as the company continues to execute against the below timeline, which they have been doing flawlessly thus far, the value of the company will continue to increase. And it will increase quicker and in a more significant way with each milestone that is met as the business progresses.
Never invest more than you can lose. This investment could literally go to $0 overnight with bad news regarding validation, etc. I obviously don't think this will be the case, but as an investor you have to always assume the worst case scenario so that you don't invest more than you can afford to lose. And, always be prudent. If you have a significant gain (you have to define what 'significant' means to you), my rule of thumb is to take 20% or so off the table to reduce risk and to lock in some profits. At what point you take additional profits is something that you, and only you, can decide based on considerations described above.
Questions? Comments? Personal experiences you want to share?