November 14, 2015

When Should I Sell My Stocks?’ Never, Actually

For many investors, it’s a question just as pressing as what stocks to buy: “When should I sell my stocks?”

When Should I Sell My Stocks? Never, Actually.Like many of the worthiest conundrums in life, there are endless ways to approach the question.  Warren Buffett famously said, “Our favorite holding period is forever,” a philosophy evidenced by his highly successful buy-and-hold strategy. Others might tell you to sell when a stock’s price-to-earnings ratio rises to historical highs, while still others may advise selling after enjoying a certain percentage gain or when a dreaded technical signal rears its ugly head.

Everyone has their own investing style and financial needs — and we don’t pretend to know them. Necessarily, we answer this oft-asked question from a long-term perspective, and as it generally pertains to the stock market as a whole.

With our scope now defined, the answer to “When should I sell my stocks?” becomes rather simple. Uncle Warren is right — never sell your stocks.

The issue of when to sell a specific stock requires far more attention and study than the issue of when to sell the broader stock market as a whole. The greatest investor of all time, Warren Buffett, essentially does away with this constant, nagging question with a simple criterion: “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.

In other words, if there’s a possibility the underlying business could be uprooted, disrupted, or otherwise crushed in the next decade, Buffett would say the time to sell that particular stock is now.

John Bogle, legendary investor and founder of the Vanguard Group mutual fund family. Of market timing, Bogle said: “After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently. I don’t even know of anybody who knows anybody who has done it successfully and consistently.”


No comments:

Post a Comment