To Sell or Not to Sell?

[Hershey]

This decision remains the hardest one for me to ever resolve, especially when I have significant gains in a security.  I have read many different ideas on the subject, but am interested in any more thoughts on the subject that people want to share.  As background, I am a long-term investor and  would have about 30% long-term capital gains tax at combined federal and state level.  I think the potential pain of missing out on an upswing that may occur after my sale (loss aversion) often causes me to hold on too long.  On the other hand, paying the gains tax causes me great discomfort.  So, now, after that psychological interlude, I'll sign off.  Thanks,

[karthikpm]

I am sure almost all investors would agree selling is the hardest part of the decision process in investing. I think buying a handful of great companies that compound over long periods of time gets rid of the decision of selling.

 

As Munger says

 

"If you buy something because it’s undervalued, then you have to think about selling it when it approaches your calculation of it’s intrinsic value. That’s hard. But, if you can buy a few great companies, then you can sit on your ass. That’s a good thing. " 

[hardincap]

"If you buy something because it’s undervalued, then you have to think about selling it when it approaches your calculation of it’s intrinsic value. That’s hard. But, if you can buy a few great companies, then you can sit on your ass. That’s a good thing. "

 

Except thats not how he invested in his partnerships.

 

People need to stop taking what Buffett and Munger say as the gospel truth, and look at what they actually DO.

[peter1234]

Some think about it as replacing a stock with an idea that has 50-100% better upside.

 

Others sell gradually (like 25-30%), wait and see how you feel about.

 

;)

[Liberty]

"If you buy something because it’s undervalued, then you have to think about selling it when it approaches your calculation of it’s intrinsic value. That’s hard. But, if you can buy a few great companies, then you can sit on your ass. That’s a good thing. "

 

Except thats not how he invested in his partnerships.

 

People need to stop taking what Buffett and Munger say as the gospel truth, and look at what they actually DO.

 

It doesn't mean it's not good advice, though. Especially for people who aren't a young Munger or Buffett (which is almost everybody who will hear what they say)... Most people are probably best following the advice that they give. But if you want something harder to pull off that could potentially give higher returns, then it's fine to go to the next level and read 10Ks from company A to company Z for 90 hours a week.

[hardincap]

"If you buy something because it’s undervalued, then you have to think about selling it when it approaches your calculation of it’s intrinsic value. That’s hard. But, if you can buy a few great companies, then you can sit on your ass. That’s a good thing. "

 

Except thats not how he invested in his partnerships.

 

People need to stop taking what Buffett and Munger say as the gospel truth, and look at what they actually DO.

 

It doesn't mean it's not good advice, though. Especially for people who aren't a young Munger or Buffett (which is almost everybody who will hear what they say)... Most people are probably best following the advice that they give. But if you want something harder to pull off that could potentially give higher returns, then it's fine to go to the next level and read 10Ks from company A to company Z for 90 hours a week.

 

Finding companies worth holding forever isn't exactly a walk in the park either. And its exceedingly rare.

[Travis Wiedower]

If you own stock A and you think your expected value (EV) is higher in stock B, sell A and buy B. If A's EV is higher than your alternative investments, stay with A. That's how simple it is in my mind.

[LC]

There is buy or there is sell, there is no hold

-Yoda (or Li Lu?)

 

Following this advice, if you aren't willing to buy at today's prices, you should sell.

[hardincap]

There is buy or there is sell, there is no hold

-Yoda (or Li Lu?)

 

Following this advice, if you aren't willing to buy at today's prices, you should sell.

 

This makes no sense, and is not at all how Buffett or Munger invests.

[LC]

There is buy or there is sell, there is no hold

-Yoda (or Li Lu?)

 

Following this advice, if you aren't willing to buy at today's prices, you should sell.

 

This makes no sense, and is not at all how Buffett or Munger invests.

 

I think it does make sense, why do you disagree?

 

Also it is in fact how Munger invests given he has a portion fo his wealth being managed by Li Lu.

[Liberty]

"If you buy something because it’s undervalued, then you have to think about selling it when it approaches your calculation of it’s intrinsic value. That’s hard. But, if you can buy a few great companies, then you can sit on your ass. That’s a good thing. "

 

Except thats not how he invested in his partnerships.

 

People need to stop taking what Buffett and Munger say as the gospel truth, and look at what they actually DO.

 

It doesn't mean it's not good advice, though. Especially for people who aren't a young Munger or Buffett (which is almost everybody who will hear what they say)... Most people are probably best following the advice that they give. But if you want something harder to pull off that could potentially give higher returns, then it's fine to go to the next level and read 10Ks from company A to company Z for 90 hours a week.

 

Finding companies worth holding forever isn't exactly a walk in the park either. And its exceedingly rare.

 

Nobody said it was easy, especially not Munger. But I think it's more attainable for most investors than to do what a young Buffett did, especially if you coattail other great investors and clone their ideas.

 

And I don't think forever means forever anyway. It's shorthand, but in reality, it's 'hold a truly great business until the story changes'. You can buy Berkshire with the intention to hold it forever, but if Buffett goes away and you see all his succession plans falling apart (Ted and Todd start sucking, the culture changes, the businesses become badly managed and perform badly, etc), you aren't supposed to hold it just because someone used the word "forever". Munger would certainly agree with that and probably be displeased at anyone who took his advice too literally.

[karthikpm]

I agree with Liberty. Munger and Buffett have always said it was simple, not easy. It is not meant to be literal either. Very few of the original S and P companies are still listed. ( though many are split, renamed etc)

 

However, a fidelity study ( Mohnish references this in his recent video) showed that the accounts that performed the best had a " forever " holding period

 

http://www.businessinsider.in/Fidelity-Investments-Did-A-Study-On-Which-Client-Accounts-Did-Best-And-What-They-Found-Was-Hilarious/articleshow/41738344.cms

[peter1234]

I agree with Liberty. Munger and Buffett have always said it was simple, not easy. It is not meant to be literal either. Very few of the original S and P companies are still listed. ( though many are split, renamed etc)

 

However, a fidelity study ( Mohnish references this in his recent video) showed that the accounts that performed the best had a " forever " holding period

 

http://www.businessinsider.in/Fidelity-Investments-Did-A-Study-On-Which-Client-Accounts-Did-Best-And-What-They-Found-Was-Hilarious/articleshow/41738344.cms

 

Interesting that Greenblatt found the same thing with his first formula funds. People that had forgotten about them and just held their stocks did best.

 

[Liberty]

I agree with Liberty. Munger and Buffett have always said it was simple, not easy. It is not meant to be literal either. Very few of the original S and P companies are still listed. ( though many are split, renamed etc)

 

However, a fidelity study ( Mohnish references this in his recent video) showed that the accounts that performed the best had a " forever " holding period

 

http://www.businessinsider.in/Fidelity-Investments-Did-A-Study-On-Which-Client-Accounts-Did-Best-And-What-They-Found-Was-Hilarious/articleshow/41738344.cms

 

Interesting that Greenblatt found the same thing with his first formula funds. People that had forgotten about them and just held their stocks did best.

 

This makes a lot of sense. Look at any long-term, multi-decade chart of the market (at least in the US) and it's clear that things are generally moving up at a pretty good clip. Hence Buffett's advice that most regular people should hold a low-cost index fund. It's psychological forces that make people sell at the bottom and buy at the top.