November 16, 2011 - This is one of the toughest questions for investors. When there's a profit in a stock, should they take it and run, especially when the market is so volatile and profits that took years to attain are wiped out in hours? Here are some questions to ask before you take money off the table.

- Is there good news pushing the stock higher? In other words, is a new contract the reason the stock is moving up. Or was a lawsuit settled or was there a bid made for the company. Any time there's a positive reason for a stock going higher, it's best to stay with it, analyze the news, and then make a decision. If the news is monumental enough to affect earnings for years, in a positive way, it's best to stay with the stock. If it's not, take advantage of the blip up.

- Can you switch from the profitable stock to one similar that is undervalued? This is a good way to stay in a sector, take some profits, and re-invest in a stock that hasn't been fully valued. That's also an ideal scenario. Make sure you understand the reason for the lagging stock. If it's not as well valued as its competitors, there's usually a good reason for it. Careful on this one. Also, keeping a portion of your winner is a good way of lowering your risk, taking a profit, yet still be able to benefit should it go even higher.

Can you replace the yield? One of the great opportunities this volatile market has given investors is the ability to buy stocks with very high yields. If the stock you own has weathered the worst of the storm battering its industry, most likely it will only get stronger. If you bought it at a very low point, your yield will look very attractive. Buying another stock with a lower yield may not be in your best interest.

What about taxes? What about them. They shouldn't figure into selling a stock, especially in this market. One day you see stocks run up by 5 or 6 points, only to drop 10 or 11 the next. Taxes are the tail, not the dog. Taking profits when you decide is the only way to ensure you're taking profits. Waiting another month for long term capital gains can be disastrous on your returns. What if another exogenous factor like a terrorist attack hits? That's never in anyone's financial planning, and we all know it can happen at any time.

In this stock market, it's high anxiety every day. Should you sell, should you buy? If you buy and make a quick profit, should you sell? Remember that trading ultimately is a losing game. The only way to make money in the market consistently is to buy and hold stocks that have ever increasing earnings. Having said that, this market encourages smart investors to take some profits when presented. Consider the above questions before you enter your "Sell" ticket.

Ted Allrich