LogFAQs > #938340929

Just to get this all in one post because its important to understand the math behind different investment tactics:

THE STEADY HOLD METHOD
You put in $1,000 in stock A at $5 and sell it at $6.
This is a 20% gain which comes out to a $200 profit.

THE SELL AND PARTIAL RE-INVEST METHOD
You put $1,000 in stock A at $5.00. It goes up to $5.50 at which point you sell. You immediately buy back in for another $1,000 at $5.50. It goes up to $6 and you sell.
This starts with a $100 profit in the first sale, and a 9.1% profit the second time ($91). This comes to $191 profit.

THE SELL AND FULL RE-INVEST METHOD
You put $1,000 in stock A at $5.00. It goes up to $5.50 at which point you sell. You immediately buy back in using your original $1,000 plus the profit of $100, totaling $1,100 at $5.50. It goes up to $6 and you sell.
This is a 10% profit the first time you sell to for a $100 profit and a 9.1% profit the second time for a $100.09 profit, totaling a $200.09 profit.

THE SELL AND MARKET TIMING METHOD
You put $1,000 in stock A at $5.00. It goes up to $5.50 at which point you sell. It then drops to $5.25 at which point you put in another $1,000. It goes up to $6 and you sell.
This is a 10% profit the first time you sell it ($100 profit) and a 14.29% profit the second time ($143 profit). This comes to $243 profit.