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Post #2 Top 3 Selling Mistakes
Gaurav Singh
September 19, 2022
In his book, Beating the Street, Peter Lynch writes that in 1979, he bought Home Depot for 25 cents a share and sold it a year later as he had lost interest in it. What happened afterwards caused him eternal remorse - he says. The stock became a 260 bagger in the next 15 years. The company is still thriving today and its stock price has multiplied more than 3000 times since 1982 - don't believe me? check out the graph below:
source: Google Finance
There are countless stories like this where all the investor had to do was to not sell. Imagine doing all the research - finding the right stock - buying it and selling it prematurely: the worst kind of anticlimax ever!!
1. The Economy, Ladies and Gentlemen is weak
Don't sell. The economy may be weak today but as countless times in the past it will rebound and stocks will flourish again. There is no use heeding to economic forecasts - a smart investor is usually better off ignoring them completely.
I think if you spent over 13 minutes a year on economics, you've wasted over 10 minutes. It's not helpful.
2. My Lords, stock prices are going down
Don't sell. Stock prices going down in of itself is a bad reason to sell. In fact, it might be a good opportunity to **buy** good quality businesses (the ones you hold or new ones) if you have done your research properly.
A stock market decline is as routine as a January blizzard in Colorado. If you're prepared, it can't hurt you. A decline is a great opportunity to pick up the bargains left behind by investors who are fleeing the storm in panic.
3. Speak Take profits now or forever hold your peace stocks
Don't sell. If you are sitting on historical profits, why sacrifice future profits if the business(es) you hold still follows your investment thesis.
We need to emphasize, however, that we do not sell holdings just because they have appreciated or because we have held them for a long time. (Of Wall Street maxims the most foolish may be "You can't go broke taking a profit.") We are quite content to hold any security indefinitely, so long as the prospective return on equity capital of the underlying business is satisfactory, management is competent and honest, and the market does not overvalue the business.
Stay calm - do your research and stay invested. Paper profits are not too bad after all!!
Disclaimer: The contents of this article are for information and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice.