There is a common saying among stock traders: “Whenever I buy a stock, it starts to drop, and whenever I sell it, the price begins to rise.” Many jokingly suggest that others could succeed in stock investing simply by doing the opposite of what they do. This phenomenon is not unique to any one person—almost every investor has experienced it at some point.
“At what point should I sell a stock to realize profits?” This is an important yet extremely challenging question. The decision to sell ultimately depends on how one views the nature of stocks and their relationship with the issuing company.
Value investors see stocks as ownership in a company. When they buy shares, they consider themselves owners of that business.
In reality, most corporate decisions are made in alignment with the interests of major shareholders and long-term investors. Companies operate with the goal of sustained growth and long-term survival. If corporate decisions were made solely for short-term traders, the company would lose its identity and likely face a crisis before long.
Value investors should adopt a shareholder mindset similar to that of major stakeholders. They invest in stocks under the belief that as a company’s intrinsic value grows, its stock price will naturally follow.
The fundamental principle of stock investing is to hold shares in high-growth, profitable companies over the long term, benefiting from compounded returns. Therefore, for value investors, the best way to “sell” is to buy stocks they never intend to sell.
This means investing in businesses with solid business models and outstanding management, allowing investors to share in the company’s increasing value over time. Identifying a company’s business model and management quality requires some effort, but it is certainly achievable.
The most crucial aspect of investing is selecting strong companies with long-term value appreciation. Such stocks are known as “stocks you never sell.” Buying these stocks is far more important than perfect market timing because long-term returns are ultimately higher.
For value investors, the question of when to sell is not a core consideration—it is merely a secondary concern after selecting the right company. Their principle is to buy and hold stocks that exhibit continuous growth, strong profitability, and trustworthy leadership—stocks that they never need to sell. Just as frequently changing lanes while driving does not necessarily make you reach your destination faster, constantly switching stocks makes it difficult to build wealth.
However, in reality, unforeseen events can occur in a company, and different stocks have different investment rationales. There are also cases where a stock trades at an irrationally high price, making selling unavoidable. These situations will be discussed in the next article.
Even in such cases, selling should not be done mechanically based on whether the stock has risen or fallen. A value investor must have a clear conviction about a company’s value. The more this conviction differs from general market sentiment, the greater the potential for higher returns.
The right time to sell a stock is not determined by analyzing price charts but by closely observing the company in which you have invested.
