Bitesize: How do you know when to sell?

Alec: [00:00:07] Welcome to Bitesize on Get Started Investing feed. In this series, we feature some of our favourite lessons, quotes and moments from the podcast. If you'd like to listen to the full episode, we've included the link in the show notes. So selling? Yes. Where do we start? It's a big topic. I mean, it isn't. Don't you only ever sell when you're 65 and you retire and you cash out all your super and take that caravan trip around Australia.

Bryce: [00:00:38] That's it. Hit 65. Hit the sell. 

Alec: [00:00:39] Button. Yeah. Yeah. 

Bryce: [00:00:40] You go travelling. Yeah, yeah, yeah, yeah. I mean it's a tricky one and we've got some, some reasons here. But firstly I think the important thing is to consider who you are as an investor. 

Alec: [00:00:52] Yeah, I think that's the right place to start because you're investing style and your investing philosophy will dictate the answer to these questions. So to start with a few examples of investors that were not, you know, if you're a momentum trader, you're looking at things like trading volume, how much people are buying, like what the price is doing sort of day to day. Your reasons for selling will be when momentum slows down or when the price turns. You know, if you're a technical trader, so you're looking at charts and you're looking at patterns in charts and drawing lines and all of that stuff, you'll be looking at charts for sell signals. You'll be looking at certain patterns that indicate that the stock price will fall. And that's why you're selling. You know, if you're a GameStop short seller, then you would sell when you realised that you've lost billions of dollars and you need to get bailed out like your investing style will dictate how you sell. So let's frame this conversation in the type of investors that we are, the type of investor that most well, almost all the experts we speak to are and that we think makes the most sense. And from what we can tell, most of the Equity Mates community are. I'd be very surprised if 95% of our community were looking at charts and we'll try to use this. We have really missed the mark on our focus. 

Bryce: [00:02:19] We don't know our audience.

Alec: [00:02:21] So let's answer the question what kind of investor are you with long term investors looking to buy great companies that can generate more profit or take that profit, reinvest in their business and grow it over time? 

Bryce: [00:02:37] Yeah, yeah. 

Alec: [00:02:38] And in this episode we will touch on selling ETFs or managed funds as well. But we'll get to that. We'll get to that. Yeah. 

Bryce: [00:02:46] So we've got five main reasons here that we're going to go through within the context of what Rand just said. As you know, we're not going to. 

Alec: [00:02:53] Be sold for four main reasons. \

Bryce: [00:02:55] Four one, two, three, four, five. I'm saying five. 

Alec: [00:02:59] You slipped a fifth in there. But that's if you if you read down the page, you would say, that's okay. 

Bryce: [00:03:04] All right. Well, sure, four main reasons with a number of others. 

Alec: [00:03:09] So for. 

Bryce: [00:03:10] Many of the. 

Alec: [00:03:11] Main reasons, there's a myriad of other reasons. 

Bryce: [00:03:16] So the first one, Ren, is all about goals. Obviously, if you have reached your investing goals and it might be a time for you to consider selling and you know, if you think about people will use the stock market perhaps to save for a deposit on a house, they might use it to, as you said, retire those sorts of things. If you reach your investing goal, then it kind of makes sense that you should consider selling and using the money for whatever that goal was. Reason number two, and this is probably the biggest for us and you know, it has been indicated by a lot of the experts that will speak to you later as well, but that is to sell when your thesis has changed. And for those that have just joined the show, a thesis is really your reasoning for buying the stock in the first place. If that changes and you no longer can say the reason you bought it is the reason that you're still holding it, then it is. It's time to sell. 

Alec: [00:04:14] Yeah, yeah, yeah.

Bryce: [00:04:16] All right. So reason number three to consider when to sell is when the price of your stock is fully realised. Now, what does that mean? Well, it means if you've put in the work and you say, I'm buying this company at $5. But I believe that if everything goes according to my calculations, it's worth 50. If it hits that price, then it might be a reason for you to sell because everything in your formulas and your modelling and your research, you know, has led to this price point. So that is a consideration. I guess the question is what about thinking if it's going to continue to run beyond 50.

Alec: [00:04:55] Yeah. 

Bryce: [00:04:56] And, and then also a company that you're holding for ten, 20 years, you know, how do you recalculate? And I think that sort of the key is to re-evaluate when it does hit that mark. And then the last one, Ren, is if there's a better opportunity out there. Yeah. So it's pretty straightforward. If, if and this is obviously if you don't have cash on the side or you find that if. You might be getting better returns if you sell a stock and put it into an opportunity that you obviously think is going to give a better return, then it's an opportunity to consider selling. Yeah. Yeah. Pretty straightforward. 

Alec: [00:05:34] Um, so to recap the four major reasons we'll get into Bryce mystery, fifth reason in a second and the four major reasons is your, your investment goals have changed, and that's really about you, your lifestyle, your life circumstances. Secondly, when your thesis is broken, the reason you bought the stock no longer applies. Three When the price is fully realised, so there's no value left in holding it. And then fourthly, when there's an opportunity to do something better. Yes, a stock. 

Bryce: [00:06:06] If you enjoyed that bite size, you'll find a link to the full episode in the show notes.