After Doubling, What?

Q

When one of my stock holdings doubles in value, would it be smart to sell it and buy a different stock that looks more undervalued? — D.B., St. Joseph, Michigan

A

Maybe — but maybe not. Focus more on how overvalued or undervalued you think the stock is and what you think of the company’s growth prospects than on how much it has grown.

Do you believe it still has a lot of room to grow? If so, consider hanging on to all or some of your shares. The stocks of many great companies have doubled and doubled repeatedly over the years. On the other hand, if, after doing some research, you’re not so sure about it, you might sell some or all of your shares, thereby locking in at least some gains. If you don’t understand the company’s business very well, selling is smart.

Meanwhile, if the stock has grown so much that it now makes up a significant chunk of your portfolio’s total value, consider selling at least some shares so that you don’t have too many eggs in that one basket. Even seemingly terrific companies fall on hard times — you don’t want too much of your money tied up in one stock.

Q

What do brokerages charge to buy or sell a stock? — R.L., online

A

In the old days, each trade could cost several hundred dollars. Today, though, many major brokerages charge commissions of around $7 or less per trade. They typically offer other services, too, such as stock research, banking and/or financial planning.

Don’t just focus on commission costs, though, when seeking a brokerage — especially if you don’t trade often.