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