When to Sell a Stock: A Simple Guide
Fiscal Investor rule: Selling shouldn’t be emotional — it should be factual.
You don’t sell because a chart wiggles. You sell when the reason you bought is no longer true, or when your real life needs the cash.
Good Reasons to Sell
1) Wrong Facts
Your original thesis was incorrect
- You made a mistake in your analysis
- The business is worse than you thought
- Management is poor or not trustworthy
- The competitive position is weaker than expected
2) Changing Facts
The thesis is breaking in real time
- The business fundamentals are deteriorating
- Management quality is declining
- Capital allocation is getting sloppy (bad deals, buybacks at bad prices)
- The competitive advantage is weakening
3) Better Opportunity
You need cash for a clearly superior idea
- You found a much better investment (risk/reward is meaningfully higher)
- But you need to sell something to fund it
Tip: “Better” means better expected returns for the risk — not just a hotter story.
4) Real-Life Cash Need
Your plan requires it
- You have an important financial commitment to meet
- You actually need the money for something specific
Fiscal Investor mindset: investing supports life — not the other way around.
Bad Reasons to Sell (Don’t Do These)
Avoid These
1) “The stock is overpriced.”
- Great businesses often look expensive for long stretches
- Focus on long-term cash flows and durability, not short-term price labels
- Your purchase price is history — what matters is future returns from today
2) “It went up from my buying price.”
- Making 50% isn’t a sell signal — broken fundamentals are
3) “I expect a correction/pullback.”
- Trying to time the market rarely works consistently
4) “I want to lock in my paper profits.”
- This is often market timing in disguise
“If you did your homework when buying a quality stock, you should almost never sell it.
Only sell when the fundamental reasons you bought it are no longer true.”
Bottom line: The best sell decision is usually boring.
Re-check your thesis. Track the facts. Ignore the noise.
When the facts change, act. Until then, let compounding do its job.