3 Good Reasons to Sell Your Stocks

There can be many good reasons why you shouldn’t sell your shares. But, every now and then, there may be good reasons for us to part ways with them.

Today, I would like to share three potential reasons to consider.

Your financial goals are met

One good reason to sell your shares would be to raise funds to meet your financial goals.

For instance, if you have been investing for your child’s education fees for the last two decades, then having to pay for his or her studies now (or in the short-term future) could be a great reason to sell your stocks.

After all, one of the reasons why we invest is exactly that – to meet our financial needs or goals.

Faulty investment thesis

As I shared before, investing guru Peter Lynch believes that a good reason to sell a share would be due to it having deteriorating business fundamentals.

Long time investors in classified directories publisher Global Yellow Pages Limited (SGX: Y07) may agree with this. In this case, the company’s revenue has declined by more than half over the past decade as it struggles to re-invent itself.

Global Yellow Pages' historical revenue

Source: S&P Capital IQ

The deteriorating revenue has not gone unnoticed, as shares of Global Yellow Pages have fallen significantly over the same period as seen in the chart below:

2015-04 Yellow Pages

Source: Google Finance

The bottom line is this: If you had purchased shares of a company based on a thesis that is no longer valid, you may want to consider putting the shares on the chopping block.

It helps you sleep at night

At first glance, this may sound like a flimsy reason on why you should sell your stocks. But hear me out. Step number 12 on the Fool’s 13 Steps to Financial Freedom provides a great explanation on this topic:

“It is tough to put a dollar value on peace of mind. If you have an investment whose fate has changed such that it now causes you to lose sleep, that could be a great cue to move your dollars elsewhere. We save and invest to improve our quality of life, after all, not to have our spouse grumble at us for tossing and turning all night long.

Adding insult to injury, stressing about a share might cause you to lose focus and make rash decisions elsewhere in your portfolio. Remember, there’s no trophy or prize for taking on risk in investing. Stick with what you’re comfy with.”

A Fool’s take

In my opinion, it’s important that we do not develop a habit of selling our stocks too soon. That said, it does not mean that every company would be a good buy-and-hold investment. We have to constantly remind ourselves of the reason that we are investing, and be open to all opposing views that may make or break our investment thesis.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.