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Chapter 4. Managing Profits and Losses > Managing Profits with Options

Managing Profits with Options

The very real problem of “managing” profits is often ignored by investors. (It may seem odd to refer to the “management” of profits because the usual thinking is, you either sell to take profits or leave them intact; but in fact, management is precisely what you want to do, even when your primary emphasis is on long-term growth.)

The traditional advice to buy long-term stocks and ignore short-term volatility is generally good advice. But ironically, it may also be irresponsible to simply leave it at that. Your on-going portfolio management involves many chores, mostly centered on monitoring fundamental indicators. If and when corporate strength, competitive position, dividend payments, earnings trends, capitalization, and other fundamentals change, you may decide to sell shares and redirect a portion of your capital elsewhere. This is basic and sensible.


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