Tuesday, September 18, 2007

Why I sold BNS Holding

It turns out that my BNS Holding shares were not cashed out. While this was disappointing, it didn't surprise me too much and I was able to sell my shares at $13. On an annualized basis, I earned 23.30% on the transaction. Not a disaster by any means, but not the profit I was hoping for. At several points after it became clear the transaction was falling apart, I could have panicked and sold at a loss. But I was able to stay (relatively) calm and evaluate what I should do next.

Now I might very well have ended up with a loss anyway. Staying calm doesn't guarantee a good return. But it does give you a chance to avoid loss when the situation turns against you. When I bought BNS, I gave it a 95% chance of making $13.62 a share, which I suspect was a bit generous. I also was aware I might need to sell at $12 a share or less. I'd even considered the possibility that this position might be worth nothing. Being aware of the range of possibilities helped me remain calm and step off of the ship when the tide was high, not low.

No comments: