The following advice was given on the MoneyTalk podcast from The Motley Fool (fool.co.uk), in Dec 2011.
1. If You Need the Cash
You should invest for 3 years or more. Any cash you need within that time, should not be invested in stock market. Plan for longer term, so invest in stock market if you want to invest for your child’s further education, some 18years away. As that date approaches, you may want to sell some shares to move money into less volatile investments and ultimately into cash.
2. A Better Opportunity
Invest in the best opportunities, given your attitude to risk and investment strategy. If you find a better opportunity, then it may be worth selling a poorer investment in order to take up the better one. However, you should avoid trading too frequently, because you will pay too much in transaction costs. In assessing an opportunity, you shuld be looking at fundamentals, such as the strength and vision of the leadership team, or the revenue prospects etc. These should be things that are not likely to change rapidly.
3. You Don’t Agree with Company’s Change in Strategy
For example, if company decides to break up its business and sell off some parts to leave a core business. You may not agree that that is a good decision, or that it leaves you too exposed in one sector. Similarly, a company may decide to innovate or branch into other markets, which you are not comfortable with. If you can’t sleep at night, for worrying about an investment, whether it’s company strategy or volatility or whatever, then you shouldn’t be in that investment.
4. Realign/Rebalance Portfolio
Due to any buy/sell activity, or due to changing company strategy, or even just due to growth in one company in your portfolio, then you may find your portfolio becomes unbalanced. You should regularly evaluate your portfolio, to understand how much it is diversified and if it is uncomfortably unbalanced, you may need to sell one share in favour of another.
5. Evaluation
If you value a business at a certain share price, you may decide to buy the share if it is below this value, and when it reaches that evaluation target, a value investor (who doesn’t care about the compay strategy, leadership team, revenues etc) may decide to sell at this point. This is not a style that suits everyone, but if it is your style, then this may be your primary reason for selling a share.
