When to sell a stock

Do you know that Nick Train, the founder of Lindsell Train and the UK's star fund manager, has created enormous wealth simply by 'not' selling? He is a rare buy-and-hold investor who has rather successfully avoided the bad investment behaviour of over-trading. Like Warren Buffett, he believes that investors are generally too ready to sell out of investments. They are mistakenly confident that doing something, as opposed to nothing, will make a positive difference. Buying the right stocks and selling them at an appropriate time is important for stock-investing success, but it is even more important to not sell stocks prematurely. Value Research Stock Advisor not just helps you pick winning stocks, but we also keep a track of them so we can promptly tell you when it is time to exit them. But when should an investor sell his holdings? He should do so in four cases. First, when he's achieved the financial goal he was investing for, for example, retirement or paying for his kids' university education. Second, the stock's fundamentals have changed - debt has exploded, sales have gone into a terminal decline or the CEO has been arrested for defrauding shareholders. Third, the valuation or the price the stock is commanding has gone up beyond a rational explanation. Fourth, his original thesis was wrong in a substantial sense. Let's look at these reasons in a bit more detail. 1. Approaching financial goal Wealth creation is not an end in it

This article was originally published on July 04, 2019.