Buying a Stock: Step 6 – When to Sell
There are three—and only three—situations when you, a long-term investor and company part-owner, might want to sell stock you own:
- When you want or need the money – After all, that’s what you’re doing this for, isn’t it!
- When revenue or earnings growth declines – the company can no longer maintain the fundamentals that induced you to buy the shares in the first place. (Defensive Strategy) Or,
- When expected total return declines – an excessively high market price puts your five-year plan way ahead of schedule. (Offensive Strategy)
This is what separates you from “the herd” and places you strongly in the good company of Warren Buffett and the host of successful practitioners who have learned to “buy the company, not the stock.”
The adjective, “long-term” is not defined by a period of time so much as by the notion of permanence. Investors who rely upon their investments to produce the funds they live on “marry” the companies they buy. They don’t simply “have an affair” with them, as do the gamblers that give “investing” a bad name.
Their default action is “hold,” unless…. And they would, ideally, throw their shares in a drawer and forget about them, if it were prudent to do so. “Long-term” doesn’t mean six months, a year, five years, or even 20 years. It means, “so long as my company delivers the performance I bought a piece of it for.
In the meantime, those companies’ earnings grow, the value of the shares they own grows right along with it, and the unrealized gains are available for them whenever they want or need the money.
And that’s what “investing” is all about!
Your articles are always interesting and full of great knowledge. Have you considered a print button to make printing of the article easier.
Thanks,
Marty Eckerle
@Martin Eckerle
Thanks for your suggestion. It’s a good idea and I’ll look into just how to do it.
In the meantime, if you read the messages by going to my blog site, you should be able to print directly from your browser. On the other hand, if you have subscribed using your e-mail, you might be able to print from your e-mail program. But. Probably, in that case, you don’t permit HTML documents which would make them as good quality.
You might look into using an RSS feed (Google, Yahoo, or one of the others), which you can subscribe to at the same place on my blog as you may have the e-mail subscription.
In any case, thanks for your kind words. I’m delighted you thought enough about what I have to say to take the trouble to make that suggestion.