When to Sell your Stocks?
In this post, I am trying to tackle one of the most challenging questions for any investor: ‘When should you sell your stocks?’
To answer this, I’ve compiled insights from 10 of the world’s most renowned investors. The list includes Warren Buffet, Peter Lynch, Benjamin Graham, Charlier Munger, John Bogle, Ray Dalio, Cathie Woods, George Soros, Philip Fisher and Howard Marks.
If you do not know anybody in the list, don’t bother, you will know them soon..
So, let’s dive in!
Warren Buffet
Who is Warren Buffet?
Warren Buffet is the chairman of Berkshire Hathaway. He is one of the most successful investors of all time, known as the “Oracle of Omaha.”
What does he recommend on selling stocks?
Warren Buffett stresses the importance of focusing on a company’s fundamentals when deciding to sell. He advocates holding great businesses long-term unless their core advantages deteriorate. Two iconic Buffett quotes are:
- “Our favorite holding period is forever.”
- “The stock market is designed to transfer money from the active to the patient.”
These principles remind investors to sell only when the fundamental reasons for owning a stock have changed.
The second quote is funny and deep at the same time. It further stresses you to be patient when it comes to selling your stocks.
Reference: The Essays of Warren Buffett by Lawrence Cunningham.
Peter Lynch
Who is Peter Lynch?
Peter Lynch is the former manager of the Magellan Fund at Fidelity. Under his 13-year management, the fund earned an annualized return of 29.2%, and he grew the fund from $20 million to $14 billion.
He is the one, Buffet is referring to in the letter to the shareholders.
What does he recommend on selling stocks?
Peter Lynch suggests selling when the growth story of a company changes or its valuation becomes unjustifiable. As Lynch puts it:
- “Know what you own, and know why you own it.”
- “Stand by your stocks as long as the fundamental story of the company hasn’t changed”
These quotes emphasize the importance of staying informed about your investments and selling only when the story behind the stock no longer holds.
Reference: One Up on Wall Street by Peter Lynch. You can also check the quotes here.
Benjamin Graham
Who is Benjamin Graham?
Known as the father of value investing, Graham mentored Warren Buffett. His famous book, The Intelligent Investor, has gained recognition as the foundational work in value investing.
What does he recommend on selling stocks?
Benjamin Graham advocates selling when a stock’s market price significantly exceeds its intrinsic value or if your investment thesis no longer applies. Graham famously said:
- “The intelligent investor is a realist who sells to optimists and buys from pessimists.”
- “Buy cheap and sell dear.”
These quotes highlight the importance of valuation and rational decision-making in determining when to sell.
Reference: The Intelligent Investor by Benjamin Graham. You can also find his quotes here.
Charlie Munger — Emotional Discipline
Who is Charlie Munger?
Vice Chairman of Berkshire Hathaway, Munger is a close collaborator of Warren Buffett and a proponent of rational decision-making. He is also the the author of “Poor Charlie’s Almanack”.
What does he recommend on selling stocks?
Charlie Munger emphasizes emotional discipline and rationality in investing. He warns against making decisions driven by emotions, such as fear or greed. As Munger famously said:
- “The big money is not in the buying and the selling, but in the waiting.”
- “The first rule of compounding: Never interrupt it unnecessarily.”
In other words, sell only when a rational analysis — not your emotions — dictates it.
John Bogle
Who is John Bogle?
Founder of Vanguard and pioneer of index funds, Bogle championed low-cost, passive investing for individual investors. He is credited with popularizing the index fund.
What does he recommend on selling stocks?
John Bogle believed in simplicity and staying committed to your investment strategy. He discouraged chasing short-term trends and emphasized long-term discipline. Two of his most impactful quotes are:
- “Time is your friend; impulse is your enemy.”
- “Owning the stock market over the long term is a winner’s game, but attempting to beat the market is a loser’s game.”
For index investors, Bogle advised selling only to rebalance or achieve specific financial goals, never to chase fleeting market gains.
Reference: The Little Book of Common Sense Investing by John C. Bogle. You can also find his quotes here.
Cathie Wood
Who is Cathie Wood?
CEO of ARK Invest, Wood focuses on disruptive innovation and has become a leading voice in tech and future trends. Her flagship ARK Innovation exchange-traded fund has received accolades for its performance in 2017, 2020 and 2023.
What does she recommend on selling stocks?
Cathie Wood believes in the power of disruptive innovation to drive long-term growth. She suggests selling if a company fails to stay ahead in innovation or loses its competitive edge. Two of her notable quotes are:
- “The seeds for what is going to be explosive growth over the next 5 to 10 years are being planted today.”
- “A correction is a great time to determine what are our high conviction names.”
These insights remind investors to evaluate whether a company’s innovative strategies align with future market opportunities.
Reference: ARK Invest Research Papers
George Soros
Who is George Soros?
Founder of Soros Fund Management, George Soros is a legendary macro investor, famous for his bold and high-risk bets, including his shorting of the British pound.
What does he recommend on selling stocks?
George Soros is known for his ability to quickly admit mistakes and cut losses, a hallmark of his trading strategy. As Soros himself said:
- “It’s not whether you’re right or wrong, but how much money you make when you’re right and how much you lose when you’re wrong.”
- “I’m only rich because I know when I’m wrong.”
These quotes highlight his focus on managing risk and exiting positions when the underlying thesis no longer holds true.
Reference: The Alchemy of Finance by George Soros. You can also find the quotes here.
Philip Fisher
Who is Philip Fisher?
Author of Common Stocks and Uncommon Profits, Philip Fisher was a pioneer in growth investing and focusing on innovative companies.
What does he recommend on selling stocks?
Philip Fisher emphasized the importance of patience and long-term focus when investing. He believed in holding onto great companies through market cycles. As Fisher famously said:
- “The stock market is filled with individuals who know the price of everything, but the value of nothing.”
- “If the job has been correctly done when a common stock is purchased, the time to sell it is — almost never.”
These quotes underscore the importance of evaluating a company’s potential for sustained innovation and growth over years, not just months.
Reference: Common Stocks and Uncommon Profits by Philip A. Fisher. You can also find his quotes here.
Howard Marks
Who is Howard Marks
Co-founder of Oaktree Capital, Howard Marks is a leading expert in value investing and market cycles.
What does he recommend on selling stocks?
Howard Marks believes in understanding and managing risk, focusing on the relationship between risk and reward. His advice on selling revolves around assessing whether holding a stock remains prudent. Marks often says:
- “You can’t predict. You can prepare.”
- “The biggest investing errors come not from factors that are informational or analytical, but from those that are psychological.”
These insights highlight the importance of avoiding emotional decision-making and selling when the risk outweighs the potential reward.
Reference: The Most Important Thing by Howard Marks. You can also find his quotes here.
Ray Dalio
Who is Ray Dalio?
Dalio is one of the most influential macro investors in the world. He is the founder of Bridgewater Associates, which is the world’s largest hedge fund.
What does he recommend on selling stocks?
Ray Dalio emphasizes diversification and maintaining balance in your portfolio. He advises rebalancing to manage risk and protect against market volatility. Two of his most famous quotes are:
- “If you don’t own gold, you know neither history nor economics.”
- “In order to be successful, you’re betting against the consensus, and you have to be right.”
These quotes highlight Dalio’s focus on preparation and diversification, suggesting that rebalancing isn’t just about stocks but managing broader asset classes to reduce risk.
Closing Remarks
That’s it for today’s insights! Remember, selling a stock isn’t just about numbers — it’s about strategy, discipline, and understanding your financial goals.
Few common denominators do reflect from these investment leaders —
- You need to be patient
- You need to have a long term perspective
- You need to feel like an investor in the business
And then only, you can strategize your sell decisions.
Which of these strategies resonates most with you? Let me know in the comments below!
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