The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails

The Hardest Decision

There are few absolute truths in the market, but this is one: Selling is the hardest decision any investor makes. In comparison, buying stocks is easy. Scores of “stock analysts” have a million reasons why you should buy a stock. Revenues are growing. Earnings are growing. A new product will soon be launched. The company is a takeover target. The stock is attractively priced. A major investor—maybe Paul Tudor Jones—is buying shares.

Selling is Wall Street’s essence just as surely as buying is Main Street’s. Wall Street almost never tells you to sell. That could anger corporate executives and cost banks lucrative investment banking assignments. To make money, to truly succeed in the market, you have to teach yourself how to sell. If you don’t learn to be a disciplined seller, you risk losing more money than you make.

On Wall Street, the “sell discipline” defines the market’s highest echelons. It is rarely discussed. Selling is a philosophical discipline as much as an expression of willpower. There is no one-size fits-all approach. The sell discipline varies according to investment styles and timelines and many other factors, including profits to be realized by selling, or losses to be limited. The market is so big that it accommodates many different styles. Some of the styles are radically different from each other, save one important similarity: discipline. Successful investors and traders disagree all the time, but they all adhere to their specific discipline. ...