Course 112:
Know When to Sell
In this course
1 Introduction
2 Four Reasons to Sell
3 Reasons Not to Sell
4 More on the Four


The last of Morningstar's Four Principles of Profitable Investing is "Know When to Sell." Despite the examples highlighted in Stocks 111 about the mathematical advantages of being a long-term investor, there's something we didn't mention: Knowing when to sell is a key part of successful investing. As Kenny Rogers would say (or sing), "You gotta know when to hold 'em, and know when to fold 'em." He was referring to a game of poker, but the same could be said of stocks.

Even long-term investors have to sell eventually because very few stocks are "hold forever" stocks. Knowing when to sell is difficult, and there is a fine line between being in the market for the long haul and making short-term decisions about whether or not to sell.

Part of the problem is that investors are inundated with advice about which stocks to buy, but sell recommendations are as rare as reliable Elvis sightings. Wall Street sure isn't providing any help, though. According to the Financial Times, even with the increase in "sell" and "hold" recommendations recently, explicitly negative recommendations still account for less than 2% of the more than 25,000 analyst notes in circulation. Telling investors to stay away is just not in Wall Street's best interests.

But there is hope….

Next: Four Reasons to Sell >>


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