Selling stock

In contrast to buying, selling shares is rarely fun.

It is hard to sell shares regardless of whether you made money or lost money. If your shares are worth more than you bought them for, you are going to have to pay taxes on the gains. Let’s say a stock has gained $100,000 since you bought it. When you sell, the first pain is taxes. It hurts to write a check for $30,000 and get nothing visible in return. And then you have $70,000 left, not the original $100,000!

If the shares are currently trading for less than you bought them for…there is still hope! It might go back to what you paid! When you sell a stock that you lost money on, the loss is permanent. You are forced to come to grips with the fact that you lost some hard earned savings. You could have used that money to take a family vacation. Or buy a new car. Or put more into your children’s college savings.

As a result, most people’s solution is to not sell.

Here’s some techniques I have used to get better at selling.

The first exercise is to get better at not losing money. When you feel like a stock might have reached its peak, write down the date, the price and how much you’d sell. You don’t even need to sell any shares. Sometimes you’ll be wrong and you’ll miss out on gains. But because you did not actually sell, you still have the gains. You just need a couple of times where your selling instinct was right for this to help. Avoiding a $50,000 loss for many people is more powerful than a $50,000 gain.

The second exercise is a variation of the first. Sometimes you need to sell a stock not because it has peaked but because you have found something better. With this exercise don’t sell anything but just write down how much you wished you had sold and what you’d wish you buy. Keep track of the difference between the two. Once that difference gets to $100,000 you will be kicking yourself.

The third exercise is to actually sell. Start with selling a single share. Then sell a little more the next week. And so one. Over time, you’ll get comfortable selling bigger amounts at one time.

Being good at buying is the more important of the two skills. But when you don’t buy correctly, selling is what helps you live to fight another day.