It is easier to buy a stock than to sell it. When you are buying, you calculate the intrinsic value, you take a margin of safety, then, if it is undervalued, you buy. As for selling, when do you exactly sell? Do you take profits or do you hold?
There are three main reasons why you should consider selling a stock:
1. It is overvalued - That's why I took profits in Facebook $FB first time I invested in it
2. Change in fundamentals - Why I'm taking profits on Qudian $QD
3. Opportunity Cost
Opportunity cost is really what will make the difference between selling and holding. If you have other investments in your portfolio or watchlist where you expect higher returns, it is better to take profits and invest in these other companies.
You should also look at the risk-reward asymmetry. Maybe it is better you sell a risky stock and invest in a less risky one if has become a too big portion of your portfolio. When GameStop $GME became 40% of my portfolio, I started taking profits even if I believed it would go higher.
Watch the full video on YouTube:
https://www.youtube.com/watch?v=f8Yt1LFDGTw&list=UUPO3uUyoXSaFWG-Ldq1mqEQ&index=1
Full analysis of Facebook:
https://ishfaaqpeerally.teachable.com/courses/662813/lectures/35761436
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