# Knowing when to sell



## liquidfinance (Jan 28, 2011)

Now I know if we all knew this then we would be millionaires but what do you do to decide when to sell a given stock?

What tactics do people use?
Overbought RSI
Other charting methods?
New 52 week high.
P.E over a certain % above historical average.
Trailing stop loss

I know it will also vary from stock to stock. The easiest decision would of course be if you have picked up a stock in a well defined trading range. 

This is an area is have struggled in so far as I have mainly a long term dividend approach. But I also think if a good dividend stock has risen beyond a certain part it may be worth looking to take the capital gain and buy on th pull back.


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## humble_pie (Jun 7, 2009)

it's against my religion to sell a good canadian dividend stock. 
i'd just adjust my options.


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## gibor365 (Apr 1, 2011)

I have the same problem.
Now I'm reading book about dividend investment and in simple words they tell (but this is about solid blu-chip dividend stocks):
- check yield chart and try to understand trend
- when current yield high (close to upper line) -> stock undervalued and good time to buy.
- when current yield is low (close to bottom line) -> stock overvalues and good time to sell.

I this book they give several examples and in those example this strategy mostly worked.
Take a look of yield/price chart of longest canadian dividend aristocrat TRI, when in 2000 yield touched all time low 1.1% , stock went in downtrend..., because TRI rising dividends every years those trend channels are changes.
So now (again per this strategy) if yield going down close to 3% -> time to sell, close to 4.3-4.5% -> time to buy


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## gibor365 (Apr 1, 2011)

humble_pie said:


> it's against my religion to sell a good canadian dividend stock.
> 
> 
> > Do you like Radiohead?! "Losing my religion"


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## Sampson (Apr 3, 2009)

not to be picky, but that is R.E.M., not radiohead


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## KaeJS (Sep 28, 2010)

If you wouldn't buy it at the current price - think about selling it.

And a good idea is to sell maybe half of your position. If you're wrong, you can still gain $ on the other half. If you're right - at least you locked in some high profits.


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## londoncalling (Sep 17, 2011)

I have a hard time selling. Especially, if there isn't something else I would rather own. I feel selling is probably the hardest part of investing. 

Any chance you can share the title of that book, Gibor?


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## Square Root (Jan 30, 2010)

I have trouble selling too. Especially since most of my positions would have significant capital gains tax to pay if I sold.


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## doctrine (Sep 30, 2011)

You should sell if you no longer like the company, and a good test is if you would buy it today, but another is if it has declining revenues and earnings, is cutting the dividend, or losing a competitive advantage.


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## Toronto.gal (Jan 8, 2010)

It is not easy at all, but the simple fact that I'm sure we all have learned by now [excluding newbies], is that we need to be as smart about buying as about selling [if not smarter].

'The Little Book That Builds Wealth', has a chapter on this very topic and the author's advise is to ask yourself questions below, and that if you can't answer yes to at least one, then not to sell:

- Did I make a mistake? [maybe something significant about the company was missed, in which case, cutting one's losses is best]

- Has the company changed for the worse? [if fundamentals deteriorate substantially]

- Is there a better place for my money? [a trade-off for another stock that might provide better returns]

- Has the stock become too large a portion of my portfolio? [shrinking one's position, especially for those with low risk tolerance]

As simple as the above questions are, I do find the advice helpful. As the author also says: "selling a modestly under-valued stock to fund the purchase of a super-cheap stock is a smart strategy". Indeed it has served me well in my trading.


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## gibor365 (Apr 1, 2011)

londoncalling said:


> I have a hard time selling. Especially, if there isn't something else I would rather own. I feel selling is probably the hardest part of investing.
> 
> Any chance you can share the title of that book, Gibor?


Dividends still don't lie : the truth about investing in blue chip stocks and winning in the stock market /
by Wright, Kelley.


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## Daniel A. (Mar 20, 2011)

I hold dividend stock even when the opportunity to take profit is there.
I don't see any reason to sell something giving me 32.0% return a year.
I have one that is to a point where I could take a profit of 20% but the 32% looks better.

All other holdings it comes down to if the price is more than I would pay I hit the sell button.

Another consideration is world affairs that may cause me to sit on the side.

I took a hit on uranium last spring and they are still recovering but I held. Now that they are coming back I will likely thin that area once I'm in the green.


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## londoncalling (Sep 17, 2011)

Thanks for the book titles. They are now both on request from my local public library


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## mgr1397 (Feb 21, 2012)

Daniel A. said:


> I hold dividend stock even when the opportunity to take profit is there.
> I don't see any reason to sell something giving me 32.0% return a year.
> I have one that is to a point where I could take a profit of 20% but the 32% looks better.
> 
> ...


What stock gives you 32% return??


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## Daniel A. (Mar 20, 2011)

I jumped on a couple of stocks some years ago that sold off at fire sale prices.
They had good dividends, Telus, Canexus,


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## gibor365 (Apr 1, 2011)

londoncalling said:


> Thanks for the book titles. They are now both on request from my local public library


What is the 2nd book?


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## gibor365 (Apr 1, 2011)

Daniel A. said:


> I hold dividend stock even when the opportunity to take profit is there.
> I don't see any reason to sell something giving me 32.0% return a year.
> I have one that is to a point where I could take a profit of 20% but the 32% looks better.


Same here. I have on PM gain almost 50% in 1 year and don't have intention to sell...maybe if yield drops below 3%....


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## londoncalling (Sep 17, 2011)

TGAL referenced it.



Toronto.gal said:


> 'The Little Book That Builds Wealth', has a chapter on this very topic and the author's advise is to ask yourself questions below, and that if you can't answer yes to at least one, then not to sell:
> 
> - Did I make a mistake? [maybe something significant about the company was missed, in which case, cutting one's losses is best]
> 
> ...


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## kcowan (Jul 1, 2010)

Daniel A. said:


> Another consideration is world affairs that may cause me to sit on the side.
> 
> I took a hit on uranium last spring and they are still recovering but I held. Now that they are coming back I will likely thin that area once I'm in the green.


So did I. But the reasons for the purchase are still valid so I am hanging in. I think it will be a good play in the next ten years, the original timeframe.


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## liquidfinance (Jan 28, 2011)

Looks like that's another couple of books I need to get reading.

Thanks for the responses so far.


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## Brad911 (Apr 19, 2009)

I have a post coming up on Monday on my blog titled, *Portfolio Management - When To Sell Stocks*, that the OP might be interested in reading.

It goes live at 6:00am


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## Daniel A. (Mar 20, 2011)

kcowan said:


> So did I. But the reasons for the purchase are still valid so I am hanging in. I think it will be a good play in the next ten years, the original timeframe.


Yes we are on the same page for buying in the first place.
I may just let it ride back up seeing as I took the ride down.


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## Brad911 (Apr 19, 2009)

I've provided the link above.


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## londoncalling (Sep 17, 2011)

Thanks for the link. I think it answers the question of knowing when to sell. I would agree with what you wrote. I think most investors think very little about when to sell as they are more concerned on when to buy. I myself have not been wholly satisfied with my ability or lack there of in regards to selling. I posted upthread that one should sell when they find a better place to deploy the money. After giving it some thought, and reading your blog post I would like to rephrase that. Since we as investors usually understand our holdings better than positions we do not hold, one should be careful when swapping holdings. One should definitely sell if fundamentals change in our current holding. If we choose to sell a position it may be best to sell part positions so that we can hedge our decision. The impact of the decision(right vs wrong) may be less dramatic.

Another important reason to sell would be to lock in gains. Perhaps this is the best reason as without capital preservation there is no investing capital. In sheltered accounts one doesn't have to worry about capital gains and tax loss selling but I think not selling a stock to avoid taxes is a terrible reason not to sell. Perhaps I am a week ahead of myself  

I think it was very important to mention that sometimes we should sell for personal reasons. Many investors lose sight of why they are investing to begin with.

I try to limit selling to save on trading fees. I also do not sell to rebalance.
For me the two go together. Instead I rebalance, not necessarily by stock but by asset class with new funds. Now obviously for someone who is in the withdrawal phase this would be different. 

The question of when to buy, sell, or hold is not an easy one. I think it takes planning,discipline and the ability to fight your psyche to be a successful investor. Some investors already know when to sell. But knowing and doing are two different things. It's just a question of making the plan and following it. For me I have more apprehension when it comes to selling winners than i do losers. I am also fairly new to investing so I believe/know/hope in time I will become better at the entire investing game including entering and exiting positions. 

Look forward to next week's post as I think this is an important consideration of which investors should be made aware.


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## Brad911 (Apr 19, 2009)

Developing a selling strategy is a very difficult thing for any investor, but I think its hugely important to the process. Buying is an easy thing to do, but buyers remorse and self doubt play a huge role in the psychology of selling.


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## liquidfinance (Jan 28, 2011)

I had a read through that blog and you raised some good points. I've also just purchased the Little book about building wealth which was quoted earlier.


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## MrMatt (Dec 21, 2011)

In addition to the criteria listed below.

Do you need the money for something else? 

I'd swap #4 with "Does it fit in my current asset allocation plan." Bit broader question, but in essence the same thing.





Toronto.gal said:


> It is not easy at all, but the simple fact that I'm sure we all have learned by now [excluding newbies], is that we need to be as smart about buying as about selling [if not smarter].
> 
> 'The Little Book That Builds Wealth', has a chapter on this very topic and the author's advise is to ask yourself questions below, and that if you can't answer yes to at least one, then not to sell:
> 
> ...


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## Soils4Peace (Mar 14, 2010)

Here a quote from the Index Funds Advisors website. There is no individual security risk because the portfolios are 100% index funds.



> There are certain obvious times when it is wise to consider changing index portfolios because of a change occurs in the investor’s capacity for risk. These times include:
> 
> 
> a) when investment goals change
> ...


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