Re-post Part II: When to Sell

Charles Brandes was mentored by Benjamin Graham, long after the dean of Wall Street had retired.

Here is a 12 pager from his book on when to sell.

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There are valid personal reasons why an investor might decide to sell common stocks. Perhaps you want to capitalize a new business, finance a new home, or need to cope with a sudden catastrophe. Selling stocks for personal rather than financial reasons falls beyond the scope of this chapter.

Our purpose here is to cover the selling motivated by a single objective: value investing. The chapter presents four reasons a value investor would find acceptable for premature selling, and also provides assistance in establishing value selling points. Other portions of this chapter address bear markets, market appreciation, and price fluctuation.

Several tips and clues also have been provided regarding market uncertainty and volatility.

\\FOUR REASONS FOR SELLING PREMATURELY\\

A value investor generally sells a value stock prematurely only for these four reasons:

1. A mistake was made.
2. A better prospect has appeared (rare).
3. The security no longer qualifies as a value stock.
4. The company has participated in a merger or acquisition.

\\Nobody's Perfect\\

Even the shrewdest of investors occasionally makes a mis-take. Analysis is not always perfect, so it may become apparent that a company's actual condition doesn't measure up to the original perception. Handling this type of situation calls for honesty and emotional self-control.

Above all, the ego should be kept under control. Sometimes investors fall in love with a stock. At other times, they feel foolish about being wrong and rationalize that if a

"loser" can be sold at a small profit, maybe the buy wasn't so dumb after all. That's normal and natural. But it's also dangerous. Probably more money has been lost by investors who have clung to stocks until they could break even than for any other single reason. Instead of becoming disgusted or emotionally upset, review each loss with care. In that way, you'll be learning a valuable lesson and turning a negative situation into a long-term positive.

Fortunately, over the long haul, profits obtained from good value stocks should more than offset losses from such mistakes. This is particularly true if the mistakes are recognized quickly and then rectified, permitting funds to be freed up for use where substantial gains can be produced.

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Pls continue the chapter on the link.

\Pls note the flair “Basics / Getting started”.\