【When to Sell? When Should You Not Sell?】

【When to Sell? When Should You Not Sell?】CLEC Club Writing date: Feb 12, 2019

Any reason related to pursuing a happy life is a reasonable reason to sell stocks. This is purely a personal motive, not a financial or investing consideration, and is outside the scope of this book.

"Note: If young people want to retire early, deferring enjoyment of a happy life will help them reach their life goal of financial freedom earlier. Retired investors must weigh the balance between passive investment income and quality of life. If you limit yourself to using only 3% of investment assets each year, the assets will never run out."

【The stock selling discussed in this book has only one motive behind it: seeking the greatest wealth return for the investment capital held.】

"Note: For people who only invest in indexes and do not invest in individual stocks, the only reason to sell stocks is to enjoy a happy life. The rest of what this book discusses is not within your consideration. In other words, never sell."

If you follow the stock-selection principles described in this book, there are only three reasons to sell, and there can only be three:

Selling reason 1: You made a mistake when you originally bought.

【To handle this kind of situation properly, you must rely on emotional self-control. To some extent, it also depends on whether the investor can be honest with himself or herself.】

【The two major characteristics of common stock investing are: 1. proper operation can bring rich profits; 2. proper operation must rely on a high degree of skill, knowledge, and judgment. Almost miraculous profits require very complex operating procedures.】

【Fortunately, the long-term returns from truly outstanding common stocks are usually enough to offset losses caused by a normal proportion of mistakes.】

【Once a wrongly purchased stock is held too long, it may cause a large loss. If you promptly sell a stock that was bought by mistake, the capital originally trapped in an unfavorable situation can be released and invested in other carefully selected stocks, bringing considerable profits.】

【Handling investment mistakes becomes extremely difficult because of one complicated factor: "that is the ego in each of us."】

【With investment mistakes, the key is not whether such measures happen frequently. The real question is whether the investor's (or investment advisor's) ability is insufficient, so that considerable profits often cannot be realized.】

"Note: Buying indexes does not have the so-called problem of investment mistakes."

Selling reason 2: As time passes, the company changes and is no longer as consistent with our stock-selection requirements as it was when we bought it.

【Capital gains tax, no matter how large the amount, should not be a reason to block a transfer of investment targets. In the next few years, the new investment target may possibly reach the same growth as the original stock did at the beginning.】

Selling reason 3: Sell the company you hold and move to another company with apparently better prospects.

【If the correct stock-selection principles were followed when buying the stock, this reason for selling rarely appears.】

【Before selling a holding that is already quite satisfactory in order to buy a better stock, you must put in the greatest thought so that all factors in the current situation can be evaluated correctly.】

【Readers should understand the basic investing principle known by the small number of successful investors: "stocks that are carefully selected, bought, and have withstood the test of time rarely have reasons to be sold."】

【However, in financial circles, advice and commentary constantly pour out, giving investors various reasons to sell good stocks. Are these reasons valid?】

【We previously pointed out that worries about a general bear market should not overly influence the decision to buy good stocks. If that argument stands, then we should oppose even more strongly the practice of selling good stocks because of such fears.】

【Investors should not sell stocks because they are worried about a general bear market, or they will pay an even higher price. If a company is truly outstanding, when the next bull market arrives, the stock will climb to a new historical high.】

【For investors who sell stocks because of a bear market, how do they know when to buy back in? In theory, they can buy after the coming downtrend ends. However, this assumes that investors know when stock prices stop falling.】

【Bear markets often do not come true and stock prices keep rising. Even if a bear market really arrives, I have almost never seen an investor buy back the same stock in time before the stock rises above the selling price.】

【At this point in the discussion, we come to another seemingly reasonable practice, but this practice often causes well-intentioned yet inexperienced investors to miss enormous future gains. That practice is: when an excellent stock is already overvalued, sell it.】

【Is whether the current stock price is overvalued really that important? What truly matters is that if the position held will appreciate greatly in the future, no change should be made.】

【The final example mentioned in the book: should you invest long term in your most outstanding classmate, or should you think your most outstanding classmate is overvalued, sell your most outstanding classmate, and buy a classmate who has accomplished nothing after 20 or 30 years?】【If you truly understand the common stock you hold, then most of the arguments advising you to sell a good stock sound just as foolish.】

【Investing in an outstanding classmate is already a very good choice, but human life is limited. In this era, human desires are infinite, market potential is incredible, and corporate growth does not have the same life limit as humans.】

【Note: Investing in indexes will always grow long term, never needs to be sold, and will not have an endpoint like human life. Indexes are as everlasting as the life of all humanity.】

This is an investment book worth reading.

Common Stocks and Uncommon Profits, classic new translation edition

Common Stocks and Uncommon Profits and Other Writings

Common Stocks and Uncommon Profits, classic new translation edition

Books.com.tw link

https://www.books.com.tw/products/0010721407

• Author: Philip Fisher Follow author��New feature introduction

• Original author: Philip A. Fisher

• Translator: Chen Min-jie

• Publisher: Global Publishing Subscribe to publisher new-book alerts��New feature introduction

• Publication date: 2016/07/18

• Language: Traditional Chinese