When to sell

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6. Selling for growth investors

Active growth investors base their sell decisions primarily on fundamental considerations. Unlike pure traders, they do take time to analyse key financial ratios and qualitative factors, such as the strength of a company's brands. But in contrast to passive investors, they

• seek to hold companies during phases of rapid growth, rather than indefinitely
• are prepared to invest in a wide range of companies, not just those of top quality
• are happy to turn their portfolio over more frequently in pursuit of higher percentage returns.

The general principles of selling for growth investors are easily stated. A stock should only be sold if one of the following applies:

• The fundamentals have deteriorated to the point that it is no longer an attractive investment
• The stock is significantly overvalued
• There are clearly better opportunities to reinvest the cash elsewhere.

The difficulty lies in making the necessary value judgments, e.g. deciding when exactly a stock is "overvalued".

1. When should you sell? 2. What is your overall strategy? 3. Selling for passive investors 4. When to take profits as a value investor 5. When to take losses as a value investor 6. Selling for growth investors 7. Mechanical formulas for selling 8. Selling in order to reinvest 9. Stoplosses 10. The argument over stoplosses 11. Limitations of stoplosses 12. Profit warnings 13. Selling for traders 14. William O'Neil's trading system 15. The most important rule of all 16. Emotional problems 17. Conclusion