Ask the Fool: Sell my stinkers?
Q: Should I sell my loser stocks instead of waiting for them to recover? — B.R., Fort Wayne, Indiana
A: If a losing stock faces long-term problems, selling makes sense. Don’t think too much about how much you’re ahead or underwater on any given stock, though. Instead, figure out whether you’re confident that it can grow from here.
If you’re not, why hang on, when you can likely earn a better return elsewhere? For example, if your shares of Scruffy’s Chicken Shack (ticker: BUKBUK) are underwater by $1,000 and you’ve lost faith in the company, sell them; move what you get for them into a more promising stock, where you’re more likely to earn that $1,000 back — and more.
Q: How should I, as a teen, invest my money? — P.B., Decatur, Georgia
A: Investors of all ages should only invest in stocks with money they won’t need for at least five, if not 10, years because you don’t want to have to sell just as the market crashes. Short-term dollars (say, for college expenses) are best kept in safer places, such as CDs. (You can find good CD rates at TheAscent.com and Bankrate.com.)
For long-term wealth-building, it’s hard to beat the power of stocks, and teens have gobs of time for their money to grow. If you invest $1,000 annually in an S&P 500 index fund and it grows at an annual average rate of 8%, it could be worth more than $120,000 in 30 years, when you’re in your 40s. Add to it aggressively over time, and you could retire early as a millionaire!
Learn more in “The Motley Fool Investment Guide for Teens” by David and Tom Gardner with Selena Maranjian (Touchstone, $18).
Fool’s school: Invest internationally — at home
It’s good to diversify your portfolio. You might want to consider including some exposure to non-U.S. stocks.
If you don’t know much about them and wouldn’t know which ones to pick, you can just opt for a foreign-focused fund, such as the Vanguard Total International Stock ETF (VXUS). It encompasses more than 8,600 non-U.S. stocks from around the world.
If you do want to invest in some foreign companies on your own, know that there are some risks: Foreign markets don’t necessarily work like U.S. markets. They may require less disclosure from companies, for example, and you may have fewer legal recourses than in the U.S. if something goes wrong. Also, for best results, you should have a good grasp of social, political and economic factors in any country where you’re investing.
Here’s a clever way to add international exposure to your portfolio without investing in foreign companies: You can buy shares of some familiar U.S.-based companies that generate much of their revenue abroad.
Energy giant ExxonMobil, for example, generated 62% of its 2023 revenue outside the U.S. Nike ended its fiscal year 2024 with 377 retail stores in the country and 668 outside it; fully 58% of Nike’s revenue in fiscal 2024 came from outside the U.S. Pharmaceutical giant Pfizer generated 54% of its revenue abroad in 2023, while that figure is 36% for Eli Lilly. In 2023, McDonald’s collected 59% of its revenue outside the U.S., and for Apple, that figure was 58%. You can probably think of many other companies with significant operations abroad.
We often recommend low-fee S&P 500 index funds for long-term investors. They also work well if you’re looking for international exposure, because roughly 40% of the total revenue from the 500 companies in the index comes from abroad. So with an S&P 500 investment, you can be diversified not only across many industries, but geographically as well.
My dumbest investment: Sold Tesla too soon
My most regrettable financial move was selling my shares of Tesla in 2013, after they roughly doubled in value from the previous year. — J.S., online
The Fool responds: Ouch. Tesla has split its stock twice since then — 5-for-1 in 2020 and 3-for-1 in 2022 — so when you adjust prices for that, shares spent much of 2012 in the $2 range. Fast-forward to 2024, and they were recently trading near $214, up more than 100-fold since that 2012 level. If you’re invested in a company whose quality and growth prospects you believe in, it’s often best to hang on for a long time.
That said, if you thought the shares had gotten way ahead of themselves, selling was rational. If you weren’t sure what you thought, you might have sold only some of your shares, retaining the rest. If your Tesla shares had grown to make up a big portion of your portfolio, selling at least some would also make sense, as it can be risky to have too many eggs in one basket.
This story doesn’t have to be over, though. If it’s still one of your most promising investment ideas, you can always buy shares again. If not, focus your money on those best ideas — or a simple S&P 500 index fund.
(Do you have a smart or regrettable investment move to share with us? Email it to [email protected].)
Foolish trivia: Name that company
I trace my roots back to 1973, when my founders created a new kind of flip-flop. Since then I’ve grown, partly via acquisition, and now encompass brands such as Hoka, Koolaburra, Ugg and Teva. My wares are sold in more than 50 countries and territories through a variety of channels, such as department and specialty stores, company-owned retail stores and select online stores. Today, I’m based in Goleta, California; my market value recently topped $24 billion, and in my most recent quarter, revenue rose 22% year over year. Who am I?
Last week’s trivia answer
I trace my roots back to 1907, when two teenagers in Seattle borrowed $100 and launched the American Messenger Company. I took on the name you know me by in 1919. In 1975, I became the first package delivery company to serve every address in the continental U.S. In 1985, I started delivering between the U.S. and Europe. Today, with a market value recently near $110 billion, I operate in more than 200 countries and territories. I employ more than 500,000 people and deliver more than 22 million packages daily, with annual sales near $90 billion. Who am I? (Answer: UPS)
The Motley Fool take: This stock can deliver
Shares of United Parcel Service (NYSE: UPS) were recently down 24% from their 52-week high, as the delivery company wrestled with higher labor costs and revenue headwinds. Second-quarter revenue was slightly down compared to the year-ago quarter, as more customers opted for lower-priced shipping services. However, UPS is still a profitable business that pays an attractive dividend, recently yielding 5.1%.
The company is working through its challenging environment by identifying ways to trim costs. To counter its customers’ shift to lower-priced services, UPS is exploring other revenue opportunities. It’s looking to handle more packages from small businesses, and making pricing adjustments to improve its revenue per piece.
The second quarter showed a notable improvement in U.S. average daily volume, which grew for the first time in over two years. The cost savings and pricing actions the company plans to take should improve profitability heading into next year.
This is a business built for the long run, with a big competitive advantage: Few companies can afford to invest the billions of dollars required to scale up a shipping network that can run as efficiently as UPS. Long-term investors confident that people will keep buying items online to be delivered might want to take a closer look. (The Motley Fool recommends United Parcel Service.)
— distributed by Andrews McMeel Syndication
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