Long term or Short term?

The answer, I think, is both. The market is dynamic and you should be too. There are long term plays that you hold for the long term but sometimes you need to do some short term pruning. Think of a long term hold as a plant. Every now and then you need to cut some of the wilting leaves off so the plant will thrive. Case in point:

I own CAT. I like CAT for the long term, especially with global growth on fire and emerging markets having the need for heavy machinery. It has had a nice run lately and going into earnings (yesterday) I was thinking maybe I should sell some and lock in some very nice profits. I decided against it and they reported below expectations and now the stock is down over 4% this morning.

If I would have done the prudent thing and sold some shares locking in my profit, I would have cash in my pocket and the opportunity to pick up some lower priced shares today. Lesson learned.

Whenever volatility is going to pick up (ie. earnings time) prune the plant and take some profits!