To Sell Or Not To Sell? A Perennial Dilemma!
Dalal Street Investment Journal|July 19, 2021
Most investors are cognizant of John Bogle’s renowned saying, ‘Buy right and hold tight.’ In the journey of compounding money over the long horizon, time is indeed your best friend. But, what comes after you have held on to your investments for a long period of time? What about ‘selling right’?

Buying at the right price and holding on to it decides the amount of notional profit an investor has captured. But, it is only by selling at the right price that an investor is able to recognize profits. If an investor fails to sell at the right time and price, the advantage accrued by buying right and holding tight simply vanishes. With frontline indices constantly recording new highs and the markets unwilling to pivot their upward trajectory over the past few months, a common conundrum floating through the minds of all investors is: should I sell and book profits or should I wait a little longer?

Umpteen investors face trouble when deciding to sell stocks. It’s not completely systematic and one has to acknowledge the wide range of emotions like greed, regret, or plain ‘fear of missing out (FOMO) at play. There are many investors who hold on to their stocks for a very long period of time in the hope that by doing so the returns would turn out to be astounding. Imagine buying 100 stocks of a company at `100 per share and then waiting for a good number of years till the price touches `200 per share. That’s 100 per cent profit. But is the wait worth it? So yes, selling a stock is more difficult than buying a stock. Let’s identify a few good reasons to sell a stock:

Profit Booking

There is a good chance that a stock you recently invested in has shot up significantly in a short timeframe. Don’t let this success set foot into your head and get the better of you. Keep in mind that a particular company’s stock price can soar massively in the short term for a diverse variety of reasons. It could be speculation by others, positive news, analyst upgrades, broad-based demand in the market, and whatnot. An investor must be smart and make some money off the table. Be mindful of the age-old saying ‘No one goes broke booking a profit.’ If the stock price drops substantially, later on, you can always enter again.

Failed Investment Hypothesis

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