What do the Gurus say about Selling?

Knowing when to sell stocks is one of the most difficult aspects of investing. While there is no shortage of advice on buying strategies (whether value, growth or momentum), there's a lot less written by those in the know about how investors can apply some logic to their selling decisions.

Studies do show that, when making money on a trade, people often take profits early to lock in the gain but, when losing money on a trade, most people choose to take the "risky" option by running losses and holding the stock. Unfortunately, good investors usually do the exact opposite - they cut their losses and run their profits!

The approach to selling however does depend on the underlying strategy - a value/quality would see selling very differently to a momentum investor. Value investing legend Ben Graham suggested selling after a price increase of 50% while growth and momentum-focused US fund manager William O'Neill looks for rapid breakout, momentum stocks and bails out of non-performing duds as quickly as possible. As a stark contrast to both, HYP investor, Stephen Bland, argues that one should never sell.

We discuss the issue of "when to sell" from a momentum perspective here, from a fundamental perspective here and from an income perspective here.