You did your research on what to buy, the choices you have narrowed it down and whatever you pick was the correct choice. The harder part is deciding when to sell. One of the reasons it is harder to sell than buy, is only in hindsight will you know you made the best decision. In a recent article George Athanassakos wrote an article titled A checklist to help you decide when to sell which should help you. Mr. Athanassakos is a professor of finance at the Richard Ivy Business School in London Ontario and the article was written in the Globe and Mail on May 29.

1. When management did not deliver on a major promise or lied.  If you are wondering what other problems the company has, it is time to sell, wait to see how they do, then if you wish buy come back in a few months.

2. When the balance sheet is deteriorating. When the accounts receivables and inventories rise from historical norms it is time to exit. If goodwill exceeds 20% of the company’s assets or debt is too high, move to alternatives.

3. When the market price rises beyond intrinsic value.  From the Theory of Value Investing once the stock price is higher than the intrinsic value, this is most straightforward reason to sell.

4. When the stock has risen so much that it represents a high proportion of an investor’s portfolio.  If you diversified portfolio and one of the stocks rises in value (which is good) but now represents 25% or more of your portfolio, value investing means to sell part of your holdings to lower the percentage the stock represents in your portfolio.

5. When a stock has risen sharply in a short time.   You made a great decision, the stock price is up faster than you expected it would be. Look around in the market for there are other opportunities, take your profits.

6. When a merger takes place. You will be either offered shares in the new company or cash which means you have to sell.

7. When you improve your price-to-value substantially. If one of your stocks is close to what you expect to be the high for the year, sell and switch to other companies in the grouping which are selling for less than their highs.

8. When a company’s business model has changed. When you did your research, you looked at the business model or strategy, if it changes (it maybe for the better) but you need to look at why it has changed and if the reasons keep you invested. If the change is substantial – you should look at alternatives.

Linking to dividend paying stocks, while the idea is to buy and hold for a longer period of time, companies go through cycles and sometimes it is better to sell and find another company. For companies that are growth stocks, you will move in and out of them as they grow or do not grow, for dividend paying stocks the focus is on the dividend, worry about growth of the stock price. If the dividend can not be paid it is time to leave (and usually there are plenty of clues along the way). Whether you have growth stocks or dividend stocks when you look at the reason why you bought  it will help you when it comes to the selling aspect.

There are more questions than answers, till the next time – to raising questions.