When should you sell a stock?

digitalplatform.g@gmail.com October 16, 2025Last Updated: October 17, 2025

0 0 3 minutes read

A student asks:

I have some stocks that have had big moves since April. I’m curious if you have a rule of thumb for selling stocks that make big gains in a short period of time. I hold most of my portfolio in index funds, but I like to buy some stocks that I have high confidence in. Most of the time I like to hold long term, but for some volatility, I tend to trade short term and put gains in my financial positions. I know there are tax implications here, but in the end I know I’m not going to be upset about taking a double-digit profit in a month or two.

Another student asks:

Given the recent runup, I find that most of my 5 pores have grown past the 5% concentration level. In each case, I’ve been selling enough shares to get back under 5%, but I’m getting the regret of regretting it with more profit on the table. Does the 5% rule make sense? Or does it matter when individual stocks are not part of the main investment?

There are countless books on how to buy stocks.

I have never found a useful book that tells you when to sell.

One of my favorite scenes Few men are good this is when they put a young Noah Wylie in Meah Wylie on the Stand to be asked questions about Tom Cruise and Kevin Bacon:

https://www.youtube.com/watch?v=n16ykjfvaye

Code red or directions to the menct hall are not in the book. And when is there no time at all to sell a stock.

Understanding where to sell a stock is not a science.

The smaller the stock account the more stock market gains. Many stocks crash and fail forever to reach the previous high. While picking stocks is difficult, there are clear examples where certain names have paid off well – nvidia, Amazon, Apple, Microsoft to name a few.

This is one of the reasons buying and holding is a simple plan in name only. It’s really hard to buy and hold because quick gains and quick losses can make you ask your most powerful investment questions. Things are more developed when there are owners of individual shares.

The idea of putting position size limits on your portfolio makes sense because it forces you to repeatedly position when the position is too high or too low.

But some people may experiment with this trick. Peter Lynch says, “Selling your winners and holding your losers is like cutting flowers and watering weeds.”

This makes sense to me. Switching between asset classes or investment strategies makes more sense than stock picking.

This thing You need to sell discipline in another way when you invest as a bottomless ship.

There are many different ways for you – this Sell your shares.

Some people do part-time jobs. Others want a fixed classification. Others look for technical or momentum indicators. Others invest on the importance of ratings. Some people plan to buy and hold.

You generally don’t want an investment to turn to trading unless the short-term gains are so great that they force your hand.

Here’s the most important question to ask when thinking about when it’s time to sell a stock:

Why did you buy the stock in the first place?

Is it trading or investing?

Do you have a price or return target in mind?

What would make you change your mind about a stock?

What is your time?

Do you cut your losers short or lean into the pain and buy more when the stock is sold?

You can set the stop loss But individual stocks are volatile so you can stop short of a stock you want to hold for the long term.

You can sell when the stock becomes too expensive But prices are often unreliable as indicators of time.

You can sell when your opinion has changed But that needs to come with a basic formal thesis to begin with.

The truth is knowing when to sell a stock is more art than science.