| The theory behind selling stocks is pretty | | | | |
| simple; the hard part, as always, is putting | | | | Perhaps the most curious advice of all is the |
| it into practice. | | | | English 'Sell in May and go away; don't buy |
| | | | back 'til St Leger day'. The St Leger Stakes |
| The question of when to sell a stock is one | | | | is the last English 'classic' horse race of |
| of the most talked about areas of investing. | | | | the flat season and is held in early |
| It's also one of the most vexing. And it's no | | | | September. The theory goes that you should |
| accident that these two things appear | | | | skip the summer months in the stockmarket (at |
| together. There are scores of little | | | | least in London) because prices will just |
| stockmarket tips thrown around on when to | | | | drift lower as the 'City' professionals bunk |
| sell, but if you followed most, or even a | | | | off to enjoy Wimbledon, Ascot, Henley and all |
| few, of them, you'd soon get yourself tied up | | | | the rest of it. But if everyone did sell in |
| in knots. | | | | May, then you'd need to be selling in April, |
| | | | and perhaps March and so on. And ditto for |
| 'You'll never go broke taking a profit', it | | | | buying back in September (or August ... or |
| is often said, and at first it seems like | | | | July ... ). |
| sensible advice. But you won't get far in the | | | | |
| stockmarket if you sell all your stocks the | | | | Means to an end |
| moment they pass your buy price (and you | | | | |
| eventually will end up broke from all the | | | | The truth is that you should make your sell |
| trading costs). | | | | decisions according to basic investing |
| | | | principles. The trick is to remember that |
| Another tip is to 'Buy the rumour; sell the | | | | profits in the stockmarket come from holding |
| fact', meaning that you should buy stocks | | | | undervalued investments and that buying and |
| when good news is rumoured and sell when it | | | | selling are simply means to that end. Of |
| actually appears. The idea is that people | | | | course, as we discuss in this issue's cover |
| tend to overreact to rumours, pushing a stock | | | | story, you also need to combine the right |
| beyond what's actually justified by the news. | | | | blend of undervalued investments so you're |
| This may be true, but it is of course fuelled | | | | not too exposed to any particular economic |
| by people 'buying the rumour'. | | | | shocks. |