It may seem counterintuitive, but to CNBC’s Jim Cramer, one of the best times to take stock checks on your portfolio is when stocks are rising.
“If the fundamentals haven’t changed and the company hasn’t improved, the rally may have made the stock price too expensive,” he said. “So when the market is hyped, I want you to be critical of your stocks and value them at a higher level, and I want you to ring the cash registers for some of your stocks, including your least favorites and, of course, your biggest gainers.”
Cramer acknowledged that buying low and selling high can be difficult to execute on the spot, but it’s important to grab profits before they disappear. Cramer said investors should evaluate their holdings as harshly as possible — focusing on the stock’s worst qualities, highlighting the downsides and proving that the company is worth holding.
Cramer stressed that selling stocks when you have solid gains is not a defeat. He explained that during big uptrends, profitable stocks become more expensive and less attractive because the risk-reward ratio worsens. He told investors not to get too attached to a stock just because it has made a profit. Just like blackjack, “cards have no memory,” he said.
“Don’t get carried away with the euphoria on or after a big stock price rise,” Cramer said. “The whole point of owning a stock is to sell it when it goes up and make a profit.”
