On selling

There seems to be much over-simplification here. The question can be incredibly difficult, and marginal. Tax may be critical to the decision; it is compounded gains which give long-term results. That is why the only investors (over a realistic investment timescale of 20+ years) who can hold a candle to a wide selection of ETFs continue to be ‘the Superinvestors of Graham and Doddsville’. In the final analysis, ‘getting rich slowly’ often means getting much, much richer.

It is often said that ‘it’s when you sell that counts’ but I become ever more certain that is a hopelessly superficial attitude. How you buy is the primary arbiter of success: increasing the chances of longevity by closely restricting the selection by criteria of quality.

Quite often, even a profitable sale giving satisfaction is in reality an admission of failure to choose well.


I agree on the selling question and how it comes back to correct buying. It is one of the fascinating parts of following how Saul does so well. To buy and sell with long term gains is still at a big disadvantage with just buying and holding, all else being equal. If you think about 20 years with, say 10 sales along the way, the intermittent tax payments along the way will really hit the totals versus one purchase with no taxes for the entire 20 years.

If you throw in a number of short term gains at higher tax rates, your stock picking abilities of selling one to buy another has to be very good. Not just a little better, but very good.

So the question is, can the average person expect to be that good? I would say it is very tough. Saul apparently is, my thought process is to be careful not to get too caught up in the belief that I am.

Buying good companies and allowing them to grow, even through the typical growing pains and ups and downs of any business seems like a much easier putt than hoping I am another Saul or Warren Buffett.

Although when I say that, I realize that Warren is much more in the belief of buying and never selling, partly because of the reasons mentioned here.

Now there is one caveat here. In an IRA, the story is a little different. As long as you have enough assets and use a discount broker, then the “friction” for selling and rebuying is not that great.

So for me, in my brokerage account, I buy long term, strong growth companies that I hope to never sell and I don’t sell often. In my IRA, I am more willing to sell out and buy something new…

I guess I need to track a little closer how much different my results are for the two types. It sounds obvious, but not easy since I am adding to my brokerage constantly and I keep a higher percentage of cash in that account, so there is a question of how to fairly compare the two.

Just some thoughts