Q. I am 24 and have been saving in my 401(k) for about a year, but I find mutual funds boring. So, I started paying attention to stocks. I discovered that I was good at spotting those that would do well. For a while, I made a mental note of stocks I liked, but when I saw them go up, I decided to buy my first stock. It was Garmin, which makes navigation devices for cars. I bought it for $70 and I made money immediately. Now I'm wondering how to decide when it's time to sell. Are there some rules of thumb?

— L.J., Washington, D.C.

A. When it comes to investing money for your future, boring can be beautiful.

You might be asking your question now because Garmin Ltd. stock has suddenly plunged. That might mean your initial excitement has turned to fear, dread or confusion.

After soaring to more than $122 a share in late September, shares fell below $100 last week. They've since recovered to about $108, but many analysts are telling long-term holders to sell most of their shares before things get bumpy again.

So, should you bail now and lock in your gain on the stock or hope for the magic to return?

Morningstar Inc. analyst Pat Dorsey suggests taking gains and getting out now unless you know more about the future of the company than your question suggests.

The stock plunged because of competition. Nokia, which makes telephones, is acquiring digital mapmaker Navteq Corp. That means Garmin could have another significant competitor in the navigation device business as Nokia blends navigation with cell phones.

A stock might have been a high flier and its products might be good. But when competition shows up, it means it's tougher for a company to make a profit.

Stocks do not rise over time unless a company is as profitable or more profitable than investors think it will be.

If investors simply buy based on the obvious — a good product in a growing market — they are likely to be disappointed, Dorsey said. Every other investor sees the obvious, and that is usually built into the stock price people are paying.

The disappointment might not come at first. Momentum and investor excitement can drive a stock higher for a while. But when a high-flying stock drops 20 percent, that can be a sign that "people have changed their opinion about a stock," Dorsey said.

Too often individual investors don't sell when they should.

They see a $50 stock go to $40, and say they will wait for $50 again. Then the stock goes to $35, and they wait for $40 to return.

Dorsey suggests studying a stock before buying it. Decide upfront what you think will drive profits and by how much.

On that basis, you decide if the price of the stock is too high. If you pay too much, you could have a solid stock but still encounter a plunge in price. If profits are lower than expected, or if sales growth slows because a competitor is taking business, that could be a reason to sell.

To learn how to analyze a stock, try the "research wizard" tool found under "stock research" at www.moneycentral.com. It walks you through the type of analysis professionals use.

If you don't want to do this analysis, stick to mutual funds. Picking stocks is tough. Even professionals get it wrong. But because mutual funds often hold 100 or more stocks, you have insulation if one stock suddenly takes a turn for the worse. The stronger stocks in a mutual fund buffer the effects of losers. There is safety in numbers, and you have a better chance of winning with 100 stocks than if you simply bet on one or two.

Professional stock pickers who work for mutual fund companies generally set price targets whenever they pick a stock. They analyze all the factors that they think will drive profits and estimate where the stock price should eventually go. They promise themselves to sell the stock when it reaches that point.

When that time arrives, they re-examine their analysis to see if there is new information that suggests profits will be greater than they thought. If so, they might raise their price target and hold on.

The Leuthold Group recently researched how stocks hold up over time. They reviewed the 100 largest stocks of 1966 — or the equivalent of stocks such as Exxon Mobil, General Electric and Microsoft today. Only 23 of those companies remain on the list of the largest 100 stocks.

The next time you want to buy a hot stock and figure it will be as good as gold for life, consider Polaroid. It was a hot stock in the early 1970s. A few years ago, it filed for bankruptcy, leaving shareholders high and dry.