When to Sell
Updated: Apr 5
This should be fascinating.
Why do you say that, DT?
Because it is the holy grail itself!
Care to share?
Everyone wants the answer to this idea.
Oh, I can definitely see that.
So, let’s get to it!
Yes! Now! Fast! Stat! Capital Gains!
But that’s not how we roll here.
Maybe it’s how we should roll, dude!
Not at all. We are all about…
Patience, I know.
And if we're not progressing fast enough, it is because of…
Patience. You said that.
I did, and fortunately I’m just patient enough to say it again.
I suppose you got that way overnight.
Are you even listening? At all?
I want to, but all I can think about is selling.
Why is that all you can think about?
Because these are scary times and that's my goal!
Calm down. So, your goal is to get rid of things?
Well, not in a minimalistic way.
This is great because we get to get back into goals again.
And goals are what it's all about, right?
That and rational judgment, and I was going to say, you know how important goals are to
I do and they're growing on me in the same way.
Wait until we get into repetition.
I can't wait!
Wait until we get into repetition.
I can't wait!
Wait until we…
No, you’re done. Stop.
Wait until we tell everybody when to sell. Imagine the joy of those potential gains!
When to sell is not when all of the pundits or the media or whatever telling you to sell,
When is it then?
It's when you have reached your predefined goal.
Aren't you being redundant when you say predefined goal?
Aren't all goals predefined?
That’s true if you decide, before the period of time even starts, where you are going to get off.
Any more of that roller coaster comparison?
Instead of grinding your way to the top trying to decide when or whether to get off and then riding it over the top screaming down the other side with no way to get off fast enough…
You can what?
You can instead smooth the ride out.
You can remove all of the suspense.
Because you've decided on your goal in advance because you've decided that say for example a 50% gain is what you want you take all of the uncertainty for yourself out of the deal and you set yourself free
But you'll just have to find something else to do.
True DT, but that beats having the finding done for you by someone who is not you.
Can I ask you a question?
What’s that DT?
Since you've talked about goals before…
And since you're talking about goals again…
Is that repetition or does it just feel like repetition?
Oh, both I hope!
I think I’ve made it clear that setting goals and setting them in advance is crucial to personal success.
What is the difference between Practicing something and repeating it over and over?
“Nothing”, said the Olympic athlete.
Would you ever practice something you clearly already knew?
If I wanted to get good at it…
So when to sell is when you have reached that goal that you previously set at the beginning of the investment.
To simplify even more, you end the investment at a time determined when you began the investment.
Right, and when you combine this with good additional reasons like not second guessing or armchair quarterbacking…
When you're kind to yourself and when you know what water is already under the bridge and what water is not…
Then you can win.
Why is that DT?
You got through the entire first section of this pod without answering my question!
Just like a politician would?
Yeah, just like a politician would!
Wow, I think I need a break.
So, would you mind explaining a scenario where a last minute sell decision didn't work out
Unfortunately, that's all too common and for why that is let's look at your own words when you said last minute you were revealing not following the goal.
OK we'll walk that back but give us the scenario first anyway.
OK, you buy shares of XYZ Company at $25 in the stock market with the intention of selling it at $30.
So far we're okay.
The stock hits $30 and you decide to hold out for a couple more gains.
Wait a minute, you decide to hold out?
Yes, another last-minute red flag thing that long-term investors wouldn't do.
OK, go on, I'm on tenterhooks!
The stock hits $32, then suddenly the stock price drops back to $29. You decide…
But you decided a long time ago.
Yes, but here's where the rubber hits the road. Here's where you have to put good practice into reality.
Anyway, you decide to wait until it comes back up to $30. But it keeps going down instead and you end up selling at $23.
And the point of such a stupid idea?
Careful with your phrasing there, DT. You could have made $5 on each of these shares of stock just by sticking to your initial decision.
Yes or $7.00 at its high but I would only recommend that if you started the selling process at $5 and it just took until seven dollars to execute.
That would be some pretty fast moving.
It would indeed.
So, why? What's the point?
It's the basic goal we preach to not stress to increase confidence and therefore the likelihood of actually doing it. It's really important to take as much stress as possible out of the whole process.
This goes a long way toward an acceptable risk level, which can be very important.
But aren't there technical ways to make the trade automatic?
There are DT, but they all require a good working knowledge of limit orders and in some cases they require an active broker.
In the exact same scenario where you buy XYZ Company stock at 25 with the intent of selling it at 30
You could choose to place a limit order to sell should XYZ Company stock reach a price which you specified in that sell order.
So, you'd include this in your stock sales if XYZ Company gets to 30?
in this case yes, DT. That would be a good rule of thumb.
Just be aware…
Of what? Thou sanguine coward, thou bed-presser, thou horseback-breaker, thou huge hill of flesh!
That ere thy best Henry IV, there will be more cost to that sell order!
Oh, but I have an automated robo advisor…
That's great DT, but the trade costs may still go up there too like it definitely would if you had a regional or national broker.
And that might be OK if it still fits your goal.
If it does, great! you can check that idea off as done!
OK so you could do this when XYZ Company stock Hits Your Price Target?
Yep and that would be your sell which you could also do for any other reason...
Like deteriorating fundamentals or better opportunities or other personal needs like a new business or college or house. Things you might reasonably look to your investment portfolio to find the help you need.
Sounds pretty good! What would be better?
Sticking to the original plan, sticking to your first investment thesis, is what would be better, DT.
Right, and the original plan calls for a break right now.
Oh. This will be good.
What do you mean, DT?
Watching you tie in this sell order thing.
Oh, I can do that easy.
Alright, let's go.
Are you challenging me, DT?
Yep, I'm challenging you to provide value to our listeners.
Okay. It starts with focus.
Focus? It can't be that easy.
Oh, it is. Because we're not even going to focus on the sell order.
Nope, because that's a tactical time horizon. And we must be strategic instead.
We are not going to focus on a small part of the action.
Such as understanding limit orders, let alone putting them in.
And reactions. We're not going to give the time of day to how we would react to our broker. That would be a bad idea.
And that’s tactical.
Yes, and that's the tactical part. Thank you, DT!
The strategic view is to focus on having an investment be gone.
Gone at a predetermined price.
Valid reasons with which we're happy.
And which did not cost us the time of another decision.
But what if we can't come up with a single price at the beginning?
A single price at which we would sell?
That's not a problem. In fact, it can be a really good strategy. For some more seasoned investors.
To do this, You would first set numerous price targets, let's say three.
You sell off portions, thirds since you picked three in this example, instead of all at once.
Let’s stick with the same example: You buy XYZ Company stock at $25.
You sell 1/3 of it at $27.50. Which is halfway to that $30 price target.
At $29 you sell another third.
And the final third?
The final third you sell at the original target price of 30, so you’re not changing anything.
So, what's the difference?
The difference, DT, is that you're making the call upfront.
And you don't have to make it later.
So there's no pressure, it's just a done deal.
This is successful investing.
Then you look at the results and you decide what to do next.
And how did you do that?
You took a deep dive, but at the same time you maintained your focus.
You didn't allow any of the numerous possible distractions to take your focus away from you.
Oh, and when you do that…
Then you maximize the good that you and yours get out of your practice.
And as you practice.
And repeat the practice.
Over and over again…
YOU’LL GET GOOD!
¡Gracias por escuchar! ¡A la prochaine!