When Should You Sell? Three Smart Timing Strategies for Selling Stocks

🤔 The Eternal Question of Stock Investing: When Should You Sell?

"I've been investing for about 10 years... when should I sell?" "When my stocks go up, I feel anxious like I should sell right away."

Everyone who invests in stocks faces this dilemma. Buying is easy, but selling? That's really hard. Whether prices go up or down, there's always anxiety.

Today, let's talk about three smart timing strategies for selling stocks.

💐 Don't Pull the Flowers and Water the Weeds

Some people suffer from anxiety when stock prices rise, thinking "If I don't sell now, my gains will disappear!" But wait, think about it.

When a company's stock price is rising, it usually means the business is thriving. In that case, you shouldn't sell, right?

On the flip side, many people hold onto falling stocks, thinking "I need to at least break even." Famous investor Peter Lynch described this beautifully:

"Why do people keep pulling the flowers and watering the weeds when gardening?"

You should be watering the flowers. Keep growing stocks that are thriving, and trim the ones that are wilting.

🎯 Three Times to Sell Stocks

If you fundamentally prefer long-term investing, you won't sell often. You might hold S&P 500 or big tech stocks for 15-20 years. But selling well is obviously important too. You have to sell to make money.

1️⃣ For Portfolio Rebalancing

If a specific stock or sector in your portfolio has grown too much and become too large a portion, selling some to redistribute and balance your portfolio is rebalancing.

Personally though, I don't think forcibly selling well-performing stocks just to maintain ratios is necessarily wise. Just because tech stocks have risen a lot doesn't mean you must sell them.

Conversely, if a sector or company looks really promising, selling other stocks in your portfolio to invest more there is also a smart strategy.

2️⃣ Clearing Out Stocks You No Longer Believe In

This is the most important one.

"Would I buy this stock today? No."

Such stocks should be sold regardless of current returns. If you don't believe in a stock long-term anymore, you should exit whether you're in profit or loss.

💸 Cut-Loss Case: Naver, Kakao

2-3 years ago, when Naver and Kakao stocks were soaring during COVID, I thought "These are Korea's leading internet companies, so I should have them in my portfolio."

But there was a problem. When you buy a stock, you should be able to explain for at least 5 minutes why you bought it and what you expect from it.

For Naver and Kakao, I couldn't explain beyond "they're Korea's leading internet companies." So I decided "I shouldn't hold these," and cut my losses when prices were falling. They fell even more after that.

💸 Cut-Loss Case: Allbirds

I also enjoy buying stocks of brands I love. So I bought Allbirds stock.

It dropped by almost half, so I cut my losses. After I sold, it dropped another 75%. It taught me that buying stock in a brand you love isn't always the right move.

🤷 Sold Because I Was Uncertain: LG Energy Solution

When LG Energy Solution IPO'd and was rising, I sold because I was uncertain. Not because I thought it would do poorly, but because I lacked conviction. It struggled afterwards, so it turned out to be a good decision.

😅 A Sale I Regret: Netflix

During a rebalancing 2 years ago, I sold Netflix. "OTT competition seems too intense. Every media company has their own streaming service..."

But it tripled after that. 😱

The lesson here: Don't rashly sell stocks of companies that are #1 in their industry. Being #1 means they're doing well.

However! What I bought with the Netflix proceeds matters more. I bought NVIDIA. And that went up 6x.

3️⃣ For Meaningful Large Purchases

What's the ultimate goal of investing diligently? Not to hold lots of stocks, but to live happily and comfortably.

So the third time to sell is:

Buying a home
Purchasing a new car
A meaningful big trip
Using retirement funds

When making these truly meaningful large purchases. Isn't this the ultimate goal of long-term investing and good portfolio management?

🏷️ Things to Keep in Mind When Selling

✅ Think About What You'll Do After Selling

Just because you sell doesn't mean you should pile up cash. What you'll buy next matters more. Like selling Netflix to buy NVIDIA, reinvesting in something more promising is a strategy.

✅ Don't Rashly Sell Industry Leaders

Don't casually sell stocks of companies that are #1 in their industry. Being #1 proves they're doing well. Even if they fall, they're still #2.

✅ External Factor Drops Are Opportunities

If NVIDIA drops because of something Trump said, that's not because NVIDIA's business is failing. Good stocks that drop due to external factors are actually opportunities to buy.

Sure, you'll never catch the exact bottom. But long-term, stocks bought during those dips have all been profitable.

💡 Spending Detox: How to Create More Investment Capital

You need capital to invest. For that, you need to examine your spending.

Spending detox means setting a period where you drastically cut spending. The goal isn't just to save money:

Do I really need Starbucks twice a day?
Are all these monthly subscriptions necessary?
Can't I mix and match existing clothes instead of buying new ones so often?

By examining habits this way, you build healthier spending habits.

More importantly, you can figure out the maximum you can invest. When you think "I should invest more this month," you can tighten up.

🎁 What Is Real Self-Investment?

Much of our spending is for others. A lot is for showing off to others.

But the #1 real investment in yourself is investing. What better way to invest in yourself than building assets?

As your income grows, spending shouldn't grow proportionally. Investment should grow as your income grows so your investment pocket keeps expanding and building a solid foundation for life.

✨ Key Takeaways

Don't automatically sell when prices rise - water the flowers
Exit stocks you "wouldn't buy today" regardless of profit/loss
Don't rashly sell stocks of industry leaders
Selling for ultimate goals (home, retirement, etc.) is perfectly natural
Spending detox can create more investment capital

Timing stock sales isn't as hard as you think. Clear out what you don't believe in, hold what you do believe in long-term, and use it when you really need it. That's the smart investor's selling strategy. 💪