Most investing discussions revolve around when to buy a stock. “Which stock should I buy?” is the first question that comes to your mind when you think about investments. But equally important is the question – “When should I sell a stock?”
Now, there aren’t any “10 Immutable Laws of Selling.” In fact, the answer to this question is often as difficult and subjective as deciding when to buy a stock.
But, without doubt, a disciplined sell process injects a healthy dose of Darwinism – survival of the fittest – into the portfolio. This process weeds out the weakest stocks – the ones that have deteriorated / deteriorating fundamentals or diminished margins of safety – in favour of stronger ones.
In a special e-book, and through a diagrammatic checklist (see below), I try to answer some of the questions around when to sell a stock. Not every selling rule under the sun may be included herein, but I’m sure what you read and see below will still be of some help to you.
Here’s my hand-made When to Sell a Stock Checklist…
Click here to open a larger image of the checklist.
Let me know your thoughts on the special report and checklist in the Comments section. Also, for the benefit of others, please share your personal rules, if any, for selling a stock.
Really nice post.
Sir, Keep up the excellent work.
Thanks a lot
Kudos to Vishal for such a brilliant post. Definitely among the top 10 articles ever posted on safalniveshak.
Excellent post Vishal, one of your best. Now this raises a question in my mind, when do one buy a stock? Is price an important factor when an INVESTOR looks to buy a stock.
Dear Vishal
Greetings to you..
Disclaimer First: Iam Taurus the Bull……But except seeing red…Bull has one more good quality….Laying still what so ever be the external force be…and Iam having the latter quality.Why should I sell if the dynamics of the industry that i have invested has not changed from the period that I invested into the stock after carrying on the due diligence and research.
The problem of high price and selling doubts arise when you yourself have not worked on the stock that you have invested,if you have done ample ground work and the forward view on the stock by you has not changed with the figures then you never ought to sell it on the first place.
Investors might think that they may re buy the stock again at a lower price,but that seldom works…as the stock might not give you the opportunity or you might have deployed the cash somewhere else.
For Eg.I bought this stock when it was just hammered all the way to the downside just because the management though that instead of delisting they would offload additional equities held by them to adhere to the complaisance.The stock rose more than 2x my buy price and then corrected around 15 % from the top that it made,though it may have rose more than my expectation….but has the dynamics changed for the matter that I should sell the stock.Nope….the stock is a good dividend payer….no debts on the book growing consistently at 12 to 13 %….operating in a niche environment and with a ethical management doing its business efficiently.
The problem is investors hardly think in the matter of owning a business,as a business owner would I sell my business every now and then.Nope…till the business is generating positive cash flow….why would I sell the business.
It might look simple…but the most toughest part of equity investment is sitting there quietly…..which is a great quality those who has it.Patience.
Good Post Vishal keep it up
Happy patience
Thanks and Regards
Reni George
Great post. It is important for value investors to be reminded of the basic principles once in a while.
Very nice post. One need proper knowledge to deal with stock market. I think to avoid these tension one can go via MF way to invest in stock market.
This is a great article. But my question is this. What about if you’re starting with only $25k. Wouldn’t be better to try to accomplish a 20% return as often as possible, rather than waiting for the long run?
In the Bull market, the great businesses look like greatest business and start quoting @ 50-60 PE. If one cannot book the profit, he will rue later. Infy did not perform for 10 years. So, even if one feels the business is great, he should book the profit at the sign of topping of Bull market (these signs can be easily seen. for eg at the time of Rel.Power IPO). Later, if he feels, he can purchase back the shares from Mr. Market. Nothing wrong in it. Otherwise, if the stock continues to gallop, analyse the fundas and purchase. Nothing wrong except for some additional investment. But, I caution you, very few people like Vishal only can identify the great business. Lesser mortals, like me or majority of the investors can only identify the great business only in hindsight. Else, one should have “Stop Profit”. For majority, sticking to stock is not correct without booking profit and the wisdom of the article makes ordinary investors poor by making them to hold “DLF, Suzlon, Educomp, etc.,”
I agree with Prakash. Not all stocks are enduring, especially in India. So you need a separate flow for cyclical stocks. We could be buying at low points during a bear market and sell it when general economic conditions are favourable. Similarly we need another scenario for euphoric market conditions. Infy example that Prakash cited if bought during dot com bubble by an investor would have made him recover his capital only after 10 years, let alone other stocks like SSI or Himachal Futuristic etc.
Otherwise it is a great flow chart. Thanks for all your work.
I really enjoyed your flow chart. Thank you.
Hi, Informative. Anyway, I like your handwriting.
Thanks Sowmay!
refined knowledge and helpful in decision making , appreciate your work
thanks