EM Chat: How To Know When To Sell

Bryce Leske: [00:01:27] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status, our aim is to help break down your barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my Equity Mates Ren. How are you going? [00:01:42][15.3]

Alec Renehan: [00:01:43] I'm very good, Bryce. I'm getting used to open up. Well, I think you gave it a slight twist. [00:01:47][4.0]

Bryce Leske: [00:01:48] I did change it. [00:01:48][0.6]

Bryce Leske: [00:01:49] Yeah, actually, I did a full rewrite. [00:01:51][1.5]

Alec Renehan: [00:01:51] Did you. [00:01:51][0.2]

Bryce Leske: [00:01:52] Well, after some feedback has come in from listeners, you know who I'm talking about, you know who I'm talking about. And didn't feel like Warren would actually get anything out of that episode. So, look, I beg to differ, but I have changed it. But anyway, I'm glad you like it. [00:02:07][14.7]

Alec Renehan: [00:02:07] You mean Warren contacted you and said he's actually not getting that much out of it? He actually contacted me. He just listens for the entertainment. [00:02:14][6.8]

Bryce Leske: [00:02:16] That's fine. We're all about educating, entertaining and engaging. [00:02:19][2.3]

Alec Renehan: [00:02:19] Well, there was a poll in our Facebook group shout out to the Facebook group if you're not already in it, where there was a people were voting on whether you should go back to the old. I wasn't sure. Yeah. Yeah. Oh, are you clearly not paying attention? [00:02:33][13.6]

Bryce Leske: [00:02:34] What is the answer? [00:02:34][0.4]

Alec Renehan: [00:02:35] Are the majority of people supported your change? But it was more just like its price. Let them do. [00:02:42][7.0]

Bryce Leske: [00:02:43] That's it. Fast and loose. All right. So firstly, a very quick shout out to all of those that have supported us through our support page Equity Mates dot com slash support, be it a one-time donation or ongoing. Just a massive thank you to those that have done so. Too many names to call out. But you know who you are. A big thanks. So we'll leave it there. Head to the page if you would like to, to support us in any way we can, introducing a new segment, [00:03:09][26.3]

Alec Renehan: [00:03:11] this segment is in the spirit of just let him do his thing. You've got a segment for us. [00:03:17][6.1]

Bryce Leske: [00:03:17] I do have a segment. I guess the overall theme for this actual episode, though, is how to know when to sell. That is going to be the value that we're going to try and unpack. It has come through from our community a lot of times. So that's the main crux of this episode. But kicking it off with what the. What the segment is, something that has grabbed our attention this week, and this is something that we want the community to also hit us up with. What if there has been something that has surprised you in markets or the economy or caught your attention? Head to equitymates.com/contact and leave us with a what the and we will call it out. [00:03:56][38.7]

Alec Renehan: [00:03:56] Or record. Record it. [00:03:57][1.1]

Bryce Leske: [00:03:59] And we'll play this one. It was just at the bottom of an email from one of our listeners, Nick Wine, and he was talking about other things, but just finished with a pay raise, raises up seventy eight per cent this year. And I think that is a lot better. Raise up 78 percent. That caught my attention out of nowhere because it had been lagging around the sort of dollar mark for a number of months. And it's obviously kicked off very strongly this year. [00:04:23][24.5]

Alec Renehan: [00:04:24] Now, I mean, the [00:04:24][0.7]

Bryce Leske: [00:04:24] back of the retail. [00:04:25][0.4]

Alec Renehan: [00:04:25] I don't know if I'm allowed to ask to follow up questions. [00:04:28][3.1]

Bryce Leske: [00:04:28] There is no follow up on what [00:04:31][2.1]

Alec Renehan: [00:04:32] do you know why? [00:04:32][0.3]

Bryce Leske: [00:04:33] No, it's just a lot. [00:04:36][3.2]

Alec Renehan: [00:04:37] So that's a good thing about the what the segment you don't have to know just on your own. [00:04:41][3.8]

Bryce Leske: [00:04:41] Just caught my attention. Yeah. It's just a what the and hopefully by the time we put this to air, there might be a bit of a what the segment opener that we can throw to it. But if there isn't, we'll have a chat to our producer. [00:04:52][11.1]

Alec Renehan: [00:04:53] Yeah. Yeah. I mean, this whole part of the conversation might be meaningless because people have heard the sound drop multiple times. [00:04:59][6.2]

Bryce Leske: [00:05:01] So we can cut that out. [00:05:01][0.7]

Alec Renehan: [00:05:02] But anyway, I'll leave it in [00:05:03][0.9]

Bryce Leske: [00:05:03] if you want to leave us with a what. The head to our website Equity Mates dot com forward slash contact. Leave us a message or hit us up on email and we can call out your what I like. [00:05:13][10.2]

Alec Renehan: [00:05:13] I like how for people watching us on YouTube, you did the typing action. Yeah, sure. Sure. [00:05:19][5.1]

Bryce Leske: [00:05:19] But anyway, let's move to the actual valuable part of this episode again. [00:05:23][3.6]

Alec Renehan: [00:05:23] I think that was valuable. [00:05:24][0.5]

Bryce Leske: [00:05:24] Oh, thank you. Yeah. Thank you. That is knowing when to sell. And we've obviously spoken a lot about buying stocks over the last number of years and haven't really dug into, you know, the key factors that you should consider about knowing when to sell. And I'm sure there are a lot of people who are saying their stocks go up and wondering, should I be skimming profits? Should I be selling the whole thing, put it putting it into something else. And it's not something that we often tease out of our experts as well when we chat to them is the sell side. They're always obviously talking about the buyer side. So in this episode, we're going to unpack what we think are some of the key considerations for selling. And then towards the end, we have call in a few of our experts to just get there sort of one or two minutes on why they themselves. [00:06:08][43.8]

Alec Renehan: [00:06:09] So. Yeah, yeah. So selling. Yes. Where do we start? It's a big it's a big topic. I mean, isn't don't you only ever sell when you're 65 and you retire and you cash out all these super and take that caravan trip around Australia. [00:06:25][16.6]

Bryce Leske: [00:06:26] That's it. Sixty five hit the Subotnick. [00:06:27][1.5]

Alec Renehan: [00:06:28] Yeah. Yeah. You go traveling. [00:06:29][0.9]

Bryce Leske: [00:06:29] Yeah yeah yeah yeah. I mean it's a tricky one and we've got some, some reasons here. But first I think the important thing is to consider who you are as an investor. [00:06:40][10.6]

Alec Renehan: [00:06:41] Yeah. I think that's the right place to start because your investing style and your investing philosophy will dictate the answer to these questions. So to start with a few examples of investors that we're not you know, if you're a momentum trader, you're looking at things like trading volume, how much people are buying, like what's the prices 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 and charts and drawing lines and all of that stuff, you'll be looking at charts for cell signals. You'll be looking at certain patterns that indicate the stock price will fall. And that's why you're selling. You know, if you're a game stock short seller, then you would sell when you realize that you've lost billions of dollars and you need to get bailed out like your investing style will dictate how why 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 spoke to are, and that we think makes the most sense. And from what we can tell most of the Equity Mates community, I'd be very surprised if 95 percent of our community were looking at charts and we're trying to portray this is we have really missed the mark on our business. [00:08:09][88.4]

Bryce Leske: [00:08:10] We don't know our audience. [00:08:11][0.8]

Alec Renehan: [00:08:11] 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? Yeah. Yeah. And in this episode, we will touch on selling ETFs or managed funds as well. But we'll get. We'll get to that. [00:08:36][25.1]

Bryce Leske: [00:08:37] So we've got five main reasons here that we're going to go through with the context of what Rhen just said. As you know, we're not going to be [00:08:45][7.9]

Alec Renehan: [00:08:46] four main reasons for [00:08:47][0.9]

Bryce Leske: [00:08:48] one, two, three, four, five. I'm saying five. [00:08:50][2.5]

Alec Renehan: [00:08:50] You slipped a fifth in there. But that's if you read down the page, you would say that it's OK. [00:08:55][5.1]

Bryce Leske: [00:08:56] All right. Well, sure. Four main reasons with a number of others. [00:09:00][4.2]

Alec Renehan: [00:09:04] four main reasons, there's a myriad of other reasons. [00:09:07][2.4]

Bryce Leske: [00:09:08] So the first one is all about goals. Obviously, if you have reached your investing goals and it might be 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. [00:09:36][28.6]

Alec Renehan: [00:09:37] Yeah, and let's get more specific here. Well, first of all, we don't like the idea of saving for a house in the share market because it's incredibly volatile. But, you know, I spoke to a financial adviser or whoever's advising you on buying a house about that. But that's just that's off topic. But just given you said it had to be responded to. Yeah, but yeah, like, if you reach your retirement number, if you're you know, you've you're investing goals have changed. You would probably sell a lot of your growth assets and move them to, you know, income-paying defensive assets that will sustain your lifestyle and your retirement and stuff like that. Or. Yeah, you know, if you quit your job and you know, your investment goals have changed or your investment, your needs have changed, that's going to be the first time to still sell. So it's not related to what's going on in the companies. It's what's going on in your personal life. [00:10:35][57.6]

Bryce Leske: [00:10:35] Yeah, 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 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. [00:11:06][30.9]

Alec Renehan: [00:11:07] Yeah, yeah. There's a concept in investing known as thesis drift. And basically what happens is you find a stock, you do some research, you formulate a reason to buy it, and you fall in love with the stock. And, you know, over time you convince yourself that it's a good stock, and eventually, maybe the reason you purchased it in the first place no longer applies. But you love the stock and you've done so much research on it and you've got such an affinity for it that you keep holding it and you give yourself new reasons to hold it. That's something you should avoid because if you formulate a reason to buy it that no longer applies, it probably means you should sell it. Yeah, to put it bluntly, you were wrong. Yes. Well, the company failed to do what it said it was going to do [00:11:58][51.1]

Bryce Leske: [00:11:58] or you weren't wrong in an initial investment point of view. But things have happened. The environment has changed where that company is no longer, you know, perhaps the leader in the industry or they've changed management. And you think the management's not going to be able to lead the company very well. So you may have been right, but for various reasons, your thesis may be changed or may be wrong. [00:12:20][21.9]

Alec Renehan: [00:12:20] That's yeah, that's a fair point. You were like, you know, you were right for if you bought. Yeah, yeah. If you were right for twenty years and then you something nothing changed. Yeah. It's time to go. [00:12:30][9.1]

Bryce Leske: [00:12:30] Yeah. Just a quick one on that is how do you know if your thesis has changed. This is where you do need to sort of being across your companies. The best time to understand or a review. Your thesis is reporting time. We're going through a reporting time here in Australia at the moment and overseas. But they're going to be your companies will be releasing reports on how they're performing. What's their strategy over the next four to five years? Great time to review your thesis and understand what's going on. [00:12:54][24.5]

Alec Renehan: [00:12:55] Andrew Page, who we will actually speak to later in the show, will call him and ask him this question, knowing when to sell. But he wants either on our podcast, on our TV show, some at some point when we spoke to him, he spoke about he how he looks. He checks his thesis every time there's new information. So every time the company releases a half year report or every time there's a major change that the company is talking about their results or they're giving news to the market, he will just read that and then check that against his original thesis to make sure that whatever's happening is in line with his thesis. And, you know, it's not broken. There's a famous US investor, David Einhorn, who ran Grainne like. Capital like billionaire American hedge fund manager, he had a hard rule, no broken thesis rule, where as soon as the original thesis, the reason that you pitched at the investment committee that you wanted to buy that stock as soon as that was broken, had to sell. It was like a hard roll across the floor, which makes sense. Makes sense, because to me, like, you know, there you might formulate a new thesis that may be correct and maybe a reason to hold. And if you have a new thesis, that's fair. And maybe that's a reason why you hold it. But the important thing is you're not just letting your thesis drift and you're being pretty disciplined in terms of do I actually have a reason to hold this or do I just now sort of like the company? [00:14:22][87.5]

Bryce Leske: [00:14:23] Yeah, yeah. All right. So reason number three, to consider when to sell is when the price of your stock is fully realized. Now, what does that mean? Well, it means if you've put in the work and you say, I'm buying this company at five dollars, 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 modeling 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? Yeah. And then also a company that you're holding for 10, 20 years, you know, how do you recalculate? And I think that's sort of the key is to reevaluate when it does hit that mark. [00:15:16][53.3]

Alec Renehan: [00:15:16] This is the way to think about, you know when your price is fully realized. It's probably not. Don't think about a lot of the companies that we talk about here because, you know, an Apple or, you know, Amazon or, you know, even like a Woolley's or a Coles, like in theory, they make a whole bunch of profit every year and then they find ways to reinvest that capital. And if the company is managed well, there should never be a fully realized price. There will be times where they're expensive based on their current profit. But, you know, over a long period of time, if they can keep growing, it's difficult to know when they're fully realized. Conceptually, it's it's easier to understand this if you think about like a mine and a mine has 100 tons of coal over 10 years, you're going it will take 10 years to extract that coal. The coal is worth X dollars a tonne. You do a discounted cash flow and you say, well, this is what it's worth today. And that sort of fixed. And then it's easier to say, well, what's the value of it? What's the price in the market? Is it fully realized? Is it cheap? Is it expensive? Yeah, but yeah, I really struggle conceptually with this one because philosophically, a lot of the companies that I buy, I don't think about their growth stopping and their price being fully realized. [00:16:41][84.4]

Bryce Leske: [00:16:41] Yeah, I agree. This is probably one that I don't really think about when it comes to selling, because you're right, all the companies that I'm investing in, I consider to just hopefully continue growing and growing. [00:16:53][12.1]

Alec Renehan: [00:16:54] Yeah, yeah. There is another concept here about like, you know, how we talk about the time value of money. And so, like a dollar, today is worth more than a dollar in five years. Um, let's take a company like after pay, which one is trading at 100 bucks a share now. [00:17:10][16.0]

Bryce Leske: [00:17:10] One fifty eight, I think. Chase Yeah. [00:17:12][1.8]

Alec Renehan: [00:17:14] Um. Well, I think most people can agree that based on after post current business, one hundred fifty eight dollars a share is expensive. And so you might say it might take 10 years for after pay, you know, intrinsic value to be worth one hundred and fifty eight dollars a share. And so you might say, well, look, I might sell it now because it's sort of it's valued at what should be valued at in 10 years. So I don't expect the next 10 years to have a lot of growth because the market's already put that price on it if that makes sense. Yeah. Um, so you could do that. But then, you know, to as an example, like, if it just keeps running the way it has, it'd be kicking yourself. It'll be like a thousand bucks by March. Yeah. Yeah. No, not obviously advised of this facetiously. Need to be careful about what you say after years [00:18:06][52.0]

Bryce Leske: [00:18:08] and then the last one ran is if there's a better opportunity out there. Yeah. Yeah. So it's that's pretty straightforward. If, if and this is obviously if you don't have cash on the side or you, you find that if you might be getting better returns, if, if you sell a stock and put it into an opportunity that you obviously think he's going to give a better return, then it's an opportunity to consider selling. Yeah. Yeah, pretty straightforward. [00:18:35][26.5]

Alec Renehan: [00:18:36] Um, so to recap the four major reasons, then we'll get into broths. Mystery fifth reason in a sec. But the four major reasons are your investment goals have changed and that's really about you, your lifestyle, your life circumstances. Secondly, when your thesis is broken, so the reason you bought the stock no longer applies. Three, when the price is fully realized. So there's no value left in holding it. And then fourthly, where there's an opportunity to do something better. [00:19:06][30.2]

Bryce Leske: [00:19:06] Yes, a better stock. And before we jump into my mystery fifth, we're going to take a quick break to hear from our sponsors. When you are all about getting fit, you've bought the Garmin, you bought the golf membership, you bought the gym membership, and you're on the mind MasterChef. And even in lock down last year, you bought those resistance bands of Instagram that from memory didn't even come. [00:19:27][20.9]

Alec Renehan: [00:19:28] No, look, they didn't come. But all of that effort really was canceled out by the numerous menu log orders that were a real staple of my lockdown experience. [00:19:38][9.5]

Bryce Leske: [00:19:39] Well, we've just headed into a new financial year, so I think it's time you get money fit with Virgin Money, our latest sponsor. [00:19:46][7.0]

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Bryce Leske: [00:19:59] And with the Virgin Money Go transaction account, you can earn rewards on your everyday spending with zero monthly fees. That sounds like just what you need, Ram. [00:20:08][9.3]

Alec Renehan: [00:20:09] Yeah, the FBI. Twenty one get it didn't quite work, but if my twenty two get reward money fit might be to go [00:20:17][8.4]

Bryce Leske: [00:20:18] back to your own bait virgin money terms and conditions and monthly criteria apply. Now let's get back to the show. So, again, there are a number of other reasons to consider, obviously, those four of the four that we think are applicable to us in our journey. [00:20:31][13.0]

Alec Renehan: [00:20:31] And I think the four of the most important, these ones obviously have a role and we'll get to it. But less, less high in my thinking as a 28 year old thinking about investing for the next 40 years. [00:20:46][14.4]

Bryce Leske: [00:20:46] Absolutely. So the one that I was trying to sneak in there for the fifth is all to do with portfolio management and rebalancing and diversification. So a lot of fund managers set their portfolios up to have specific allocations to either certain stocks or certain asset classes. And if your portfolio or a certain position in that portfolio grows to exceed that allocation, then they will try and sell. To give a very practical example, I might say that I don't want to pay to be more than 10 percent of my entire portfolio value. If it starts hitting 11, 12, 13 percent, then I will sell enough units that it'll bring it back down to 10 percent. Kathy would, which she has a similar sort of approach which [00:21:36][49.6]

Alec Renehan: [00:21:36] might most fund managers. [00:21:37][0.9]

Bryce Leske: [00:21:38] Yeah, exactly. So something that I don't really do, to be honest, I don't have a rule around rebalancing. So. Yeah, but it is something that the professionals do. [00:21:50][12.5]

Alec Renehan: [00:21:50] Yeah. And if you read content that's put out by financial advisors, they'll, they'll often have something similar, you know, like a five percent rule where no one stock or no one asset is more than five percent of your worth and things like that. And it's all about diversification and reducing your risk. It does make sense. Here's my philosophical problem with it. Let your winners run. Yeah. As a nonprofessional investor who doesn't have obligations to, you know, my shareholders around risk management and stuff like that, because that's why hedge funds do it. You know, they've got to manage their risk and they've got mandates and stuff like that. For me, I have no such mandate. And if well, I mean, you're a better example. I'm sure at one point after pay was a meaningful percentage of your portfolio. Yeah. Um, to ah. But to stick to an arbitrary percentage and say I'm worried about the volatility in my portfolio, so I'm going to only allow after pay to be 10 percent, you would have cut your nose to spite your face. You would have lost actual real money in the vain search for some arbitrary portfolio protection. Yeah. Like if, if it's a good company and it's going to continue to be a good company and you think it's going to continue to grow, it doesn't make sense. [00:23:12][81.7]

Bryce Leske: [00:23:13] Yeah, I agree. [00:23:14][0.7]

Alec Renehan: [00:23:15] Yeah. Anyway, that's my issue with it. It makes sense. Professionals do it if people want to do it to protect against volatile volatility and stuff like that. It obviously has a place speaking personally. I mean when it's wrong. Yeah, for [00:23:30][15.8]

Bryce Leske: [00:23:31] sure. Cut your losses. [00:23:31][0.8]

Alec Renehan: [00:23:32] If anything, at one stage, A2 milk would have been more than 50 percent of my portfolio. At one stage I had A2 Milk, Slater, and Gordon, which was cratering fast and like maybe one or two other stocks. Um, if I had said I need every stock, let's add four stocks at that time. If I said I need every stock to be twenty-five percent of my portfolio, I would have been selling a lot of shares on the way up to buy something else on the way. Yeah, there wasn't performing as well. Yeah. [00:24:01][28.9]

Bryce Leske: [00:24:02] And the final sort of reason that again this is probably more to do with where you are in your investing journey and also some professionals do it as well. But that's tax-loss harvesting. So selling for tax purposes. Again, this is something that you should talk to financial advisors about, though, and it's not something that you are. [00:24:21][18.8]

Alec Renehan: [00:24:21] You or I do know the only thing that you might think about at this stage in your life is if you're going to sell anyway. Well, actually, yeah. So if you going to sell anyway, you might want to time yourself sell, but it doesn't really matter, because if you lose money on a share and you report that to the ATO in Australia, you can claim that you can offset that against future gains on shares in future years. But, you know, financial advisors will then start doing all this stuff about, well, you've lost money on a stock. If you still want to own it, why don't you sell it and then rebuy it and claim the tax loss? Because that will be more beneficial than the additional brokerage you have to pay. Like that's where financial advisors can really help. You know, they can look at exactly what's going on with your personal circumstances and make those recommendations. We're not going to do that. No. Um, but yeah, there's that you may sometimes sell for tax reasons around harvesting those losses. Yeah. [00:25:23][61.6]

Bryce Leske: [00:25:24] So, yeah, we've touched on capital gains there and there are tax advantages, so please check with your accountant though, rather than taking it from us. [00:25:34][9.6]

Alec Renehan: [00:25:34] But don't take our actual advice from [00:25:36][2.2]

Bryce Leske: [00:25:36] there are a couple of other key considerations around thinking about selling. And of course, when you and I guess firstly, the longer you leave stocks, broadly speaking, in the market and let compounding do its thing, that's where the magic can really happen. So from our point of view, selling is not really necessary on the cards in a big way. [00:26:01][24.5]

Alec Renehan: [00:26:01] Oh, no, don't get me wrong. I've sold stocks that I was wrong about. [00:26:04][3.2]

Bryce Leske: [00:26:05] Yeah, but I'm saying just like everything that we've sort of spoken about, fully realizing the price these broken investing goals, your goal really is in 40 years time to be able to have a meaningful portfolio. That compound has done its work. Yeah. Yeah. And so when we come at it like that. Yeah. If you continue to sell and churn through, you're not going to be able to let compounding do its thing. [00:26:29][23.3]

Alec Renehan: [00:26:29] Exactly. Yeah. Now I want to quickly touch on ETFs and managed funds just for people that primarily invest in that space. And so I think the headline is these products, ETFs and managed funds are designed to be long term vehicles, long term products, long term investments. And so really your decision to buy or sell is primarily based around your lifestyle. So, you know, if you're holding a ASX 200 index, you're not worried about the price being fully realized, because the thesis is that the market will continue to get go higher as humans, you know, apply become more efficient and, you know, you know, apply their ingenuity to design new stuff and all of that, all of that good stuff. So, you know, you're not worried about the price of an index tracking ETF per side. Your thesis, again, like you're not worrying about a broken thesis if you're just investing in the ASX 200 index because the thesis doesn't break. The thesis is over history. It's returned a good return and it will continue to do so. So you really are thinking about your personal circumstances and is this investment right for you? You may also sell because there's a better opportunity out there. You might want to sell some ASX 200 ETFs to buy something. But generally, you know, to your point around compounding, you should try and avoid that just set and forget those that core ETF portfolio with managed funds. The only other thing I would add is if the manager sucks. [00:28:11][102.1]

Bryce Leske: [00:28:13] Well, hopefully, he didn't go into it if the manager [00:28:15][1.6]

Alec Renehan: [00:28:15] sucks, but sometimes the manager can sound good and it's, you know, it sucks in relation to that phase, like the best investor in Australia. You know, if Hamish Douglass was charging us a 10 percent management fee, you'd have to say he sucks in relation to his fees. That's really all I have to say. Nice. Hamish Douglass, you don't suck. [00:28:39][23.5]

Bryce Leske: [00:28:41] So we're going to take a very short break to hear from our sponsors, and then we're going to hear from a couple a few experts from the Equity Mates community to hear their thoughts on why they sell. So when we're going to call three experts, Rory, Andrew, and Jess, to hear their thoughts on why they sell, [00:28:59][18.3]

Alec Renehan: [00:29:00] so I hope they don't just disagree with what we've signed [00:29:03][2.6]

Bryce Leske: [00:29:04] because if everything we said is similar to theirs. But we have Jess Ymir, who is market analyst at Bell Direct. And Jess, the question is, how do you know when to sell me? [00:29:15][10.7]

Jess: [00:29:16] Good question. Well, I think like an investor, you need to have a set of core values. And the first one going into buying a stock is pretty important. You've got to have big balls. You got to have conviction to first buy stock. Right. So I guess when the chips are down, when a tough game, you need to remember your core values in life first. Bold. And I guess if things haven't changed and a company's earnings are still growing and is still kicking goals and hitting milestones, then you should probably hold. Right. But bottom line is, you've got to have a cool thing about your core values. And if the underlying rationale is buying a stock with if your convictions change, that's when you sell. I wouldn't sell if a business is still kicking goals. So you've got to remember the key milestones. And if a business is continuing to grow, Jannings [00:30:14][57.5]

Bryce Leske: [00:30:15] Andrew Page, the founder of Strawman.com. Andrew, how do you know when to sell? [00:30:19][4.3]

Andrew Page: [00:30:20] It's a really thorny question, but from my mind, there are only really three reasons. The first is your thesis is broken. The underlying investment case, the reason that you bought the shares, is shown to be no longer valid, or your interpretation of the facts has changed. So when that happens, sell and sell decisively. There's no point hanging on after that point. The second is if shares are too expensive and this is a really, really hard one, the market can do some really crazy things. Sometimes it gives you a bargain when it falls away, but sometimes it can make really, really great companies too expensive. And that means that you can actually get very poor returns even if the underlying business is performing well and expected to continue to perform well. So you have to look at the valuation work and you don't want to be too fussy. There's nothing more painful than selling something because you think it's three percent above some arbitrary concessive value that you come up with. But at a point, it is something that you want to consider. And I think the only other point is portfolio management. Sometimes if you get particularly lucky, you'll find that you buy a range of shares and one of them performs exceptionally well, which means that you wake up one day and 40 percent of your portfolio is composed of one stock, then that's a great problem to have. But just for risk management reasons, it's something that you might want to look at. Just to adjust a little bit before we go, guys, I know this isn't the exact question, but I had a couple of quick points here. There are there are reasons not to sell. And one reason not to sell is because the price goes up. Stocks can actually get cheaper as they rise in price. In other words, as value becomes can become what the stock we cannot they can become more valuable even though the price is going up because the business's prospects have just improved at a greater rate. And it's the same with the price falling. In fact, you may even find that the shares are more attractive as the price goes down. Price alone is not going to tell you anything without any sensible reference to valuation. And the third reason not to sell is because you predict a market crash. We all feel is that we can do this at times. We're almost always all going to be wrong. So don't try and don't even bother trying to do that. [00:32:30][130.0]

Alec Renehan: [00:32:31] I like that. I like that. Reasons were not to sell. And as Bryce is someone who predicted, what, three years running, that we would have a bear market and was wrong three years running. I think he's learned that lesson all too well. [00:32:45][13.8]

Andrew Page: [00:32:47] I know that pain, too. [00:32:47][0.9]

Bryce Leske: [00:32:50] So we are joined by Rory Lukas, chief investment officer at over at H1. And Rory, how do you know when to sell? [00:32:57][7.0]

Rory Lukas: [00:32:59] Yeah, it's a good question and it's a very important question. Just as important as it is to know when to buy a stock. The one-line answer is when you think that the stock is no longer a bargain or no longer cheap. And that sounds pretty obvious. But the way the way our guys look at it from a funds management perspective, fund managers have generally got investment mandates and within those they have guidelines and it's very public information. But Kathy Wood, who has been the superstar of the last couple of conferences, her investment mandate requires her to trim positions, in other words. So some of the holding, whenever that holding becomes up to 10 percent of the portfolio. So no stock, Teszler included. So whenever Tesla became more than 10 percent of the fund's portfolio. Kathy Trims, that's the mandate. So that's one way of how to decide when to sell a simple one liner that I was always taught as a trader is this if you wouldn't buy it at today's price, you should probably sell it. And the trading one on one. If it's not a buy, then it's a sell to that. That's my second perspective on it. And for a lot of your listeners who are a bit younger than me, my twenty two year old son gave me a look. I asked him about it and his answer, I thought was really good. And it's a bit now everyone sort of fine. My fear of missing out. But another way to think about when to sell a stock is. If you're more worried about losing some of the gains that you've made when you bought a stock than you are, then you would feel bad about having sold it and seen the stock go up further than you should sell it now. Yeah, I reckon I reckon that's a really good one. So if you bought a stock at five dollars and it's gone to ten dollars, you look at it at that ten dollars and you go, if this goes back to seven dollars or even back to five dollars. Am I going to feel worse than if I sell it and it goes up to twenty dollars? Well, you know, my fear of missing out is a bit greater than my fear of giving back some of the profits. So that's how I look at it and how my son looks at it, which I thought was really quite insightful. [00:35:30][151.6]

Bryce Leske: [00:35:32] So there we have it. Luckily, what we spoke about at the top of the episode has been echoed by these experts, which is good news. So that brings us to the end of the episode. I hope that has been able to answer some of the questions in the Equity Mates community that you may have around when is a good time to sell a few things to consider so [00:35:51][19.7]

Alec Renehan: [00:35:52] you'll never lose the uncertainty of I've made 400 percent on my investment. Should I take my profits or should I let it run like that is by its nature, investing? Yeah. Yeah. Um, and it will depend on the stock. [00:36:05][13.1]

Bryce Leske: [00:36:06] Absolutely. Yeah. So we will leave it there. A reminder that Equity Mates doesn't stop. When you have finished this podcast, you can contact us at contact@equitymates.com. You can follow us on all the social channels or head to our website, equitymates.com/contact. We also have the Get Started Investing podcast, which is for all those beginner buffet's and our Comedian versus Economists podcast, all about the macroeconomics out there and Met, Pay, Love podcast, which is all about the money side of relationships with Zoe and Carmel. So if you are not, subscribe to that, head over and check it out now. But as always Ren [00:36:46][39.9]

Alec Renehan: [00:36:46] the show lists is going to get longer and longer. [00:36:49][2.9]

Bryce Leske: [00:36:50] It's been fun to chat and we'll chat next week. [00:36:52][1.8]

Alec Renehan: [00:36:52] Sounds good. [00:36:52][0.0]

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