Sell smart, not scared

The market is feeling the heat. After a two-year bull run, it's dropped 10 to 15 per cent from September highs. For many investors, this dip triggers familiar instincts to 'book profits' or 'reduce exposure'. They have a simple and comforting appeal. However, if one were to go by what investing sage Howard Marks believes, such mantras oversimplify a much messier reality. Because when it comes to selling, most investors don't actually do it wisely; they do it emotionally. In his memo 'Selling Out', Marks delves into what drives selling decisions during downturns and why most investors get it wrong. While we've highlighted key excerpts from his missive, the entire piece is a must-read, available here: https://tinyurl.com/2m2dbyf4. Why we sell (And why we shouldn't) Marks starts by acknowledging an irony: after decades of writing investment memos, he'd never dedicated one entirely to the art of selling. "Selling is half of every investment," he admits. But despite its critical importance, most investors sell for the wrong reasons. "There are two main reasons why people sell investments: because they're up and because they're down." Let's start with the first—when investments are up, investors rush to book profits. It sounds reasonable, but as Marks points out, it's often driven more by fear than by logic. "People like the fact that their assets show gains, and they're afraid the profits will go away." It's less about making money and more about avoiding the regret of seeing gains disappear.

This article was originally published on May 01, 2025.