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A Time for Holding and Selling When It Comes to Stocks

A Time for Holding and Selling When It Comes to Stocks

Investing triggers many emotions; especially when investors have a personal attachment to a company and its stock. For years I witnessed GM employees hold onto their stock positions regardless of price volatility, only to see the same investors panic over a 10% correction in other companies they were not emotionally vested in.

Personal attachment to companies – especially to former employers or businesses associated with a favorite hobby – is understandable but financially dangerous. As we are all aware, holding GM forever didn’t work out so well.

During the late 1990’s and early 2000’s I owned a Harley Davidson motorcycle and Harley stock. We traveled the nation’s highways and attended many rallies including the company’s 100th anniversary celebration.  I kept the memories but not the stock. When conditions change, investors must be willing to part with investments.

The notion of selling a stock runs counter to what many investors believe is prudent because of taxes and transaction costs. While both are valid considerations, there are still times when it is time to part ways with a company’s stock.

When I announced on the radio – admittedly with deep sadness– that I sold my Harley stock, I explained my rationale: “I married my bride but I only date my investments.” It is okay for me to discuss the adventure Barb and I have shared for years but it is not okay to keep a stock today based on its performance a decade ago.

Just because you sell a stock doesn’t mean you can’t buy it back if conditions change. Legendary investor Warren Buffet at Berkshire Hathaway appears to share this view. Buffet is known for his long-term perspective and is not in any fashion a short-term trader. Instead, his team looks for opportunities that include new investments as well as companies they formerly owned.

A few years ago Buffet owned shares of Phillips 66, an oil refinery that had gone public.  Buffet’s team wanted to outright own a portion of the company and sold their shares to buy that position. But this week Buffet announced he had reacquired a 10% stake in the company.  The market landscape had changed.

Viewing an investment portfolio during times of market volatility makes it tempting to base decisions purely on a stock’s price. Though price is a major factor when purchasing company, it is not the overriding factor influencing a sell. It is important to ensure the current trajectory of the economy is supporting a company’s business model and that the company’s management is executing effectively.  When those conditions change, it’s time to adjust.

Certainly, investors should be aware of taxation and transaction costs when making changes.  But these factors shouldn’t compel an investor to hold poorly performing stocks over the long run. I would be rich if I had a dollar for every time I’ve heard, “As soon as (pick a company) gets back to (pick a price) then I will sell it.”

Things change and it’s an investor’s job to recognize those changes.


Joseph “Big Joe” Clark is a Certified Financial PlannerTM and the Managing Partner of the Financial Enhancement Group, LLC, an SEC registered Investment Advisor. He is the host of “Consider This” found on WQME Saturday mornings at 9am. Securities offered through World Equity Group, Inc., member FINRA/SIPC, a broker dealer and SEC registered Investment Advisor. Advisory Services can be provided by Financial Enhancement Group (FEG) or World Equity Group. FEG and World Equity Group are separately owned and operated and are not affiliated. Big Joe can be reached at bigjoe@yourlifeafterwork.com, or (765) 640-1524.



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